OREANDA-NEWS. April 25, 2011. The government has directed Reliance Industries to immediately stop supplying gas from KG-D6 block to refineries, steel firms and petrochemical plants and divert the volume to meet the demand of priority consumers, suffering a pro-rata fuel supply cut after the block's output dropped by about 28%.

The government's order will impact KG-D6 gas consumers such as Indian Oil Corp's refinery in Gujarat, Gail's Pata petrochemical plant, RIL's petrochemical projects in Gujarat and Maharastra, and Essar Steel.

" RIL has been asked to restrict gas supplies to only priority sector consumers as specified by the EGoM," a senior oil ministry officials said, adding that the priority sectors must not suffer due to the fault of Reliance.Reliance spokesman did not respond to an ET's email query.

The RIL-operated block is currently producing about 50 mmscmd gas, well short of 69.8 mmscmd as per the government approved plan. The Directorate General of Hydrocarbon (DGH), a technical arm of the oil ministry, has blamed RIL for the sharp decline in gas output. "RIL has drilled only 18 wells, while they should have drilled 22," DGH director general SK Srivastava said after a review meeting called by the petroleum secretary to assess the continued fall in gas production from KG-D6 block on Thursday.

The government's technical experts were not satisfied with RIL's reasons for a shortfall in production. "It is on the operator (RIL) to increase production," Mr Srivastava said.The decline in gas output has resulted into a pro-rata cut up to 15% in supply to gas consumers such as power and fertilizer companies. They are putting pressure on the government to meet their fuel demands as per the priority list, oil ministry officials said. Petroleum minister Jaipal Reddy had also said last week that the ministry would ask RIL to cater to priority sectors.

The government is also concerned about the future gas supply as the RIL has indicated further decline in the gas output by 5-6 mmscmd in 2012-13 while it should have achieved a peak output of 80 mmscmd by then as per the approved production plan.