MC to decide cut in gas reserves at RIL's KG-D6

Committee will decide if 80% drop in production to 13.48 million standard cubic meters per day was due to geological reasons or due to non-drilling the committed quota of 31 wells as claimed by DGH

A block oversight panel headed by oil regulator DGH will meet shortly to decide on Reliance Industries' proposal to slash gas reserves in main fields in its KG-D6 block by two-third and cut investments by $3 billion.

 

The Management Committee (MC), which also comprises representative of oil ministry, has to decide on accepting revised field development plan (RFDP) that slashes recoverable reserves in Dhirubhai-1 and 3 (D1&D3) fields to 3.4 trillion cubic feet from 10.03 Tcf estimated in the original plan of 2006.

 

Also, two-phase capex plan of $8.836 billion (proposed in 2006) has been reduced to $5.928 billion.

 

It will decide if 80 per cent drop in production to 13.48 million standard cubic meters per day was due to geological reasons or due to non-drilling the committed quota of 31 wells as claimed by DGH.

 

"MC meeting would be held soon. That is the first port of call. They have to decide what to do. And if they can't agree on the next course of action, they will refer to ministry and then the ministry will take a call," Oil Secretary Vivek Rae said.

 

If needed, the ministry may appoint an international expert to ascertain the facts, he said.

 

Rubbishing claims of holding back gas production for higher prices, RIL-BP last week told Oil Minister M Veerappa Moily that the undrilled quota of 11 wells would not increase production and current wells are enough to drain out the known reserves.

 

While drilling of the remaining 11 wells would require over $1.65 billion investment, the same reserves can be produced by spending around $0.5 billion in repairs and compression, they told Moily in a meeting also attended by Rae and DGH.

 

Sources said RIL-BP blamed output fall to drop in pressure in wells, which requires intervention like well repairs, stopping water production, and compression to pull more gas out of the reservoir and stabilise production.

 

Today, half the drilled wells are operating as the others had to be shut-in from water and sand ingress from the lack of approvals to intervene.

 

Since 2010, approvals for budgets for such activities were held back on advice from CAG. Approvals were granted in April 2013 and these activities will now be completed in 2015, losing precious time and money. In the meantime, production has declined to alarming levels, where the field is in serious threat of a shut-in.

 

If these approvals were given on time, then the current production could have been 50-75 per cent higher than the current levels and more importantly the threat of a field shut-in could have been avoided. 

 

Sources said RIL-BP will get the revised gas price of almost $8.4 for D1&D3 from April 2014 only if MC was to agree to the revised field development plan. Otherwise the old rate of $4.2 per million British thermal unit will continue to apply.

 

A similar RFDP for MA field, which has seen output fall to 3.48 mmscmd from peak of 6.78 mmscmd achieved in January 2012, was made by RIL-BP lowering the reserves and the MC accepted it. So, the new gas price will apply to MA field.

 

All other fields in the block too will get the new price which is likely to be double of current rates.

 

D1&D3 had hit a peak of 66.35 mmscmd in 2010 before falling to 10 mmscmd.

 

In the original field development plan for D1&D3, RIL had projected an output of 61.88 mmscmd from 22 wells in 2011-12 and 80 mmscmd from 31 wells in each of the years after that. The output has lagged the targets since 2011-12.

 

RIL, which had hit a peak output of 69.43 mmscmd from KG-D6 block in March 2010, is currently producing just 13.48 mmscmd (10 mmscmd from D1&D3 and 3.48 mmscmd from MA). This output is way short of 80 mmscmd target for this time of the year.