Compounding production woes at India's biggest gas field, Reliance Industries has projected a further 13% drop in output from the Krishna Godavari basin fields, a trend that Mukesh Ambani firm hopes UK's BP will help it fix.
Reliance has projected that gas output from Dhirubhai-1 and 3 (D1 and D3) gas fields in the block KG-DWN-98/3 (KG-D6), will be 38 million standard cubic metres per day in 2012-13 from current production level of 43-44 mmscmd, officials said.
D-26 or MA oilfield in the same block is expected to produce current levels of 8-9 mmscmd, taking the total output from the deep-sea area in Bay of Bengal to around 47 mmscmd. At present, KG-D6 block is producing around 51-52 mmscmd.
In its annual work programme submitted to upstream oil regulator Directorate General of Hydrocarbons (DGH), Reliance has projected maintaining the current production levels during 2011-12 fiscal.
A Reliance spokesperson declined to comment.
D1 and D3, the largest of the 18 gas discoveries that Reliance and its 10% partner Niko Resources of Canada have made in the 7,645 square kilometre KG-D6 block, had touched 53-54 mmscmd of output in mid-2010 but the production has fallen since.
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"The fields have enough reserves to support peak output of 80 mmscmd. But what Reliance has now learnt is that the gas is stored in isolated pools, which are not connected to each other. It is not able to derive entire volumes out," an official said.
Some people argue that drilling more wells could solve the problem but Reliance has concluded that the cost of drilling, completing and connecting the well to the production system exceeds the economic value of the gas to be produced.
A solution to the problem may lie with BP, which is buying 30% stake of Reliance in 23 oil and gas blocks including KG-D6, for $7.2 billion.
"BP has faced similar issues around the world and its expertise will help Reliance overcome the problem," he said.
Reliance does not propose to drill more wells on D1 and D3 unless it has BP on board and the drilling plans are vetted.
Officials said the field development plan (FDP) approved some years back, envisaged a total of 22 wells producing 61.88 mmscmd of gas from D1 and D3 fields by April 1, 2011. This was to rise to 80 mmscmd by April 1, 2012 with 31 wells.
MA field was to contribute another 8 mmscmd.
"The production plan in FDP is a guidance and not a firm commitment. Infact, Reliance had touched 60 mmscmd of output with just 16-17 wells in mid-2010. Subsequently, production started to fall," an official.
The technical difficulties at KG-D6 have been appreciated by DGH who had yesterday convened a meeting of the Management Committee of the block to discuss the issue.
Officials said Reliance has projected crude oil output from the MA field in the same block to fall to 12,050 barrels per day in 2012-13 from about 17,000 bpd current production.
Reliance at present sells 14 mmscmd of gas from KG-D6 to fertiliser plants, 24 mmscmd to power plants and the remaining 13 mmscmd to other sectors like sponge iron plants, LPG, city gas distribution (CGD), petrochemical plants and refineries.
RIL shares were trading 3.54% down at Rs 994.95 a piece on Bombay Stock Exchange at noon.
According to the FDP, Reliance was meant to put onstream 22 wells in the D1 and D3 fields by April, 2011, to achieve a production level of 61.88 mmscmd.
The situation on the ground, however, is markedly different from what was promised. As of today, only 18 wells are in production. Output from these wells -- at 43.44 mmscmd -- is lower than the 53.4 mmscmd planned in the FDP. Another 8 mmscmd is being produced from the MA oilfield in KG-D6 block.
As per the FDP, production in the block is expected to go up to 86.92 mmscmd in 2013-14 and the output would start declining from 2018-19. The field is expected to produce for a total of 13 years, i.e. till 2022.
Officials said that 18 wells have been drilled so far and completed and two more wells are complete, but not yet connected to the production system.
Reliance has so far made 18 gas and one oil find in KG-D6, which it won in consortia with Niko under the first round of the New Exploration Licensing Policy (NELP) in 2000.
Of these, two gas (D1 and D3) and one oil (MA) discovery have been put on production. D1 and D3 commenced output from April 1, 2009, while MA started production from September 17, 2008.
Reliance has been forced to restrict production from the MA oil field to about 17,000 bpd due to high water and gas output, sources said, adding that the field was yielding more water than oil and that even 8 mmscmd of gas in comparison to oil output was considered quite high.
The MA field had five oil producing wells and one gas producer.
Furthermore, four gas discoveries have been declared commercially viable, while the FDP for nine satellite finds was submitted on July 14, 2008, for approval.
The FDP for the nine satellite fields was not found techno-economically viable and Reliance submitted an Optimised FDP (OFDP) for four of these nine satellite fields on December 29, 2009. The OFDP is under evaluation by the DGH.
One discovery is under appraisal and Reliance has so far not submitted a declaration on the commercial viability of two other finds.