Europe's second-biggest oil company BP Plc today opposed upstream oil regulator DGH's and Oil Ministry's demand for drilling more wells at its partner Reliance Industries' (RIL) KG-D6 block, saying bringing newer fields into production cannot alone solve the problem of sagging output.
The Directorate General of Hydrocarbons (DGH) has faulted Reliance for not drilling its committed 22 wells on Dhirubhai- 1 and 3 fields in KG-D6 block and also for gas output falling from 61 million cubic metres per day (mmscmd) in March, 2010, to 37.5 mmscmd, instead of rising to 61.88 mmscmd as had been planned.
DGH and the Oil Ministry want RIL to drill the two remaining wells of phase-I development of D1 and D3 fields and 9 more of phase-II by March 2012 as had been committed by the company in the $8.8 billion field development plan it got approved in 2006.
BP Chief Executive Bob Dudley, on his first visit after the government approved his firm's plans to invest $7.2 billion in taking stake in 23 oil and gas blocks of Reliance including KG-D6, said drilling more wells will not solve the problem.
"You think of reservior out there that is producing today is like a coke can. People are advocating that we put more straws in it. But actually what is around it are a few more coke cans. What we need to do now is develop those satellite fields," he said.
RIL has so far has drilled 20 wells on D1 and D3 field but is producing 36.5 mmscmd of gas from 16 of them. Two wells have been shut because of high water ingress and a similar number of wells drilled recently have so far not connected to the production system.
DGH and the Oil Ministry feel that since Reliance has not kept its commitment made in the 2006 development plan, its right to recover cost should be reduced in proportion to the deficit in gas production.
RIL has so far spent $5.694 billion on the two fields and has recovered $5.258 billion from the sale of gas produced.
However, the ministry wants $1.85 billion of the cost to be reversed.
Dudley said there are more fields around the currently producing D1 and D3 fields which need to be quickly brought to production.
"What we need to do now is develop those satellite fields... We are hopeful that the government will approve development of satellites and that is how you can bring gas production back up," he said adding production can be raised by 2014.
RIL has submitted a plan to invest over $1.5 billion in developing four satellite fields around D1 and D3 to produce up to 10 mmscmd of gas by 2016.
