Reliance to shut oil field next month

Reliance Industries will shut an oil field at its showpiece KG-D6 block off the Andhra coast, for maintenance work for about two weeks starting August 1.

Reliance plans to shutdown a floating production, storage and offloading (FPSO) vessel that pumps out oil from the MA oilfield in the prolific KG-D6 block for maintenance, the first turnaround the company is taking since oil production started in September 2008, sources in know said.

The Krishna Godavari basin Block KG-DWN-98/3 (D6) has 19 oil and gas finds. Of these, the largest, Dhirubhai-1 and 3 finds and an oil field, MA, have been put into production.

MA field currently produces about 15,000 barrels per day of oil and a little less than 8 million standard cubic meters per day of natural gas.

Sources said wells in the MA field will not be shutdown during the maintenance of FPSO and they will continue to produce oil and gas.

The oil produced will be stored in a vessel while some gas will have to be flared.

"Reliance plans to upgrade a gas compressor during the shutdown. So for at least two days, all gas will have to be flared and there will be none available for sale," a source said. "For 8-9 days, some 3 mmscmd of gas will be available for sale while the rest will have to be flared."

Dhirubhai-1 and 3 gas fields in the KG-D6 block produced about 39 mmscmd of gas in the week ended July 10. Together with about 8 mmscmd from MA oilfield, the total output was from KG-D6 block was 46.8 mmscmd.

The present output is just enough to meet the contracted demand of core sectors -- 15.35 mmscmd of fertilizer units, 29 mmscmd of power plants, 0.65 mmscmd of city gas distribution firms and 2.59 mmscmd to LPG plants.

In absence of any output from MA field for at least two days and restricted availability for another 8-9 days, it remains to be seen how the oil ministry will effect cuts in allocation to the core users.

Sources said in May, the oil ministry had directed that production from KG-D6 will first go to meet the contracted demand of core users. If any gas is left after that, it can go to non-core sectors like petrochemicals, refineries and steel.

In event of output falling below what has been allocated to core users, fuel will first be supplied to fertilizer plants to their full requirement, then to LPG plants, then to power and lastly to city gas users.

If this priority remains, then city gas companies like Indraprastha Gas Ltd, which sell CNG to automobiles and piped cooking gas to households in Delhi, will run dry for about two weeks. Supplies to LPG plants of GAIL would also be impacted unless the ministry says the cut in supplies would be pro-rata.