New Delhi: Directorate General of Hydrocarbons (DGH) is likely to target Reliance Industries on Monday for the fall in production at KG-D6 gas fields by not allowing the Mukesh Ambani-firm to get back all the investment it has made.

The Directorate General of Hydrocarbons, which had not held a single meeting of the Management Committee in 9 months ending March 31, has called a meet of the panel that oversees the operations of the nation's biggest gas field on May 2.

Sources in know of the development said DGH at the MC meeting will take a very aggressive stand despite knowing that the Bay of Bengal reservoir has turned out to be more complex than predicted and there was no previous oil and gas production from the deep sea area to draw experience from.

Also, several fields in the past have shown sharp drop in output after being put into production and no action was ever taken against the operator.

State-owned Oil and Natural Gas Corp (ONGC) had designed the Neelam field facilities in the western offshore to produce 130,000 barrels of oil per day, but output dropped to just
30,000 bpd in a year's time.

Sources said DGH wants Reliance to be disallowed from recovering part of investment it has made in the KG-D6 fields, even though every penny of expenditure was approved by the MC
of which the regulator and oil ministry were members.

The MC on Monday will ask Reliance for an explanation on why it has drilled only 20 out of the committed 22 wells on Dhirubhai-1 and 3, the largest of the 18 gas discoveries made
in the eastern offshore KG-D6 block.

Reliance had achieved a production of 53 million cubic meters per day achieved in March last year from 16 wells but soon after the reservoir pressure dropped and wells pumped
higher than envisaged water, leading to a drop in production to about 42 mmscmd.

The unanticipated reservoir behaviour forced Reliance to go back to drawing board. Another 8 mmscmd is produced from MA oil field in the same block.

Sources said DGH, which is unimpressed by explanations offered by Reliance so far, would at the MC meeting press for proportionate reduction in cost recovery of its investment.

Reliance has built production facilities to support 80 msmcmd of production but production from D1/D3 and MA field is about 50 mmscmd. So, DGH wants cost recovery of only two-third of the capital spent in building those facilities.

Production Sharing Contract (PSC) allows operator to recover investment made in developing the field before sharing profits among the stakeholders including the government.

But any move to change cost recovery norm would be possible only through an amendment to the PSC, which can be done only with the approval of the Parliament. Sources said at the MC meeting that DGH might use a report by independent consultant P Gopalkrishnan who had stated that "shortfall of gas production is due to non-drilling of the adequate number of wells".

The study, according to a note of the DGH to the Oil Ministry, was carried out in DGH office and Gopalakrishnan did not seek any information or data on performance of the field from Reliance besides not approaching it for any comment.

The report held that the output at D1 and D3 fields would have been 61.88 million cubic meters per day as had been envisaged in 2006, if Reliance had drilled its committed 22
wells. However, production is 42 mmcmd from 18 of the 20 wells drilled so far.

Source said Gopalakrishnan in his report observed that increased water cut in most of the wells and also predicted this would effect at least three wells as a result.

The regulator in addition will use the outcome of the field visit done by three of its officials earlier last week to pin Reliance.

Reliance had in 2006 won government nod to invest USD 8.836 billion in Dhirubhai-1 and 3 fields in KG-D6 block after promising an output of 61.88 million cubic meters a day from
22 wells by April 2011 and 80 mmscmd from 31 wells by 2012.

The company holds 90 per cent interest in the block KG-D6, where 18 gas and one oil discovery has been made. D1 and D3 gas and MA oil finds have so far been put into production. Niko Resources of Canada has the remaining 10 per cent in the block.