NEW DELHI, JULY 28: Reliance Industries Ltd and state-run ONGCBSE -0.39 % plan sign a formal pact for sharing the infrastructure in the gas-rich D6 block of Mukesh Ambani's firm, a move that industry officials say can end the dispute over the alleged 'gold-plating' of costs in the deep-sea gas field of RIL.
ONGC, which is developing deep-sea fields adjacent to Reliance's D6 block, said that it had signed a "significant" memorandum of understanding (MoU) with RILBSE -0.11 % to work out modalities of sharing of infrastructure, identifying additional requirements and firming up commercial terms. ONGC said this would minimize its capital expenditure and speed up development of its deep-sea gas fields which will produce 6-9 million metric standard cubic metres a day (mmscmd) of natural gas in four years.

"The companies intend to enter into a formal agreement after conducting a joint study which will be spread over the next nine months," ONGC said in a statement. ET was the first to report that the state-run company would use RIL's infrastructure in the east coast.

ONGC Chariman Sudhir Vasudeva said that it is a win-win situation not only for both the companies which are striving hard to accrete new reserves and put them on production at the quickest time but also for energy starved nation.

The government and the national auditor has accused RIL of building surplus infrastructure in the D6 block. The oil ministry has disallowed recovery of part of the field-development costs on the ground that the expenditure and the infrastructure that was build was far in excess of the actual gas output, which fell sharply. Instead of rising to 80 mmscmd, natural gas output from the D6 block has fallen to about 14 mmscmd.

Reliance has challenged the decision and the matter is under arbitration. Industry officials say that utilisation of this infrastructure by a state-run firm would ease the government's concern over surplus facilities in RIL's D6 block.