Reliance Industries Ltd (RIL) and partner BP Plc have won approval from the government to prepare a plan to develop a natural gas discovery in the Bay of Bengal, two people with direct knowledge of the matter said.
A panel headed by the country’s oil and gas regulator recognised the R1 deposit as being commercially viable at a meeting held two weeks ago, the people said, asking not to be identified because the matter is confidential. The discovery is part of a cluster known as the R-Series that billionaire Mukesh Ambani’s Reliance and BP plan to jointly develop.
Reliance, which sold a 30 per cent stake in 21 fields to BP for $7.2 billion last year, had sought the government’s permission to develop new discoveries to help counter a drop in output from its main areas in the KG-D6 block off India’s east coast. The R1 deposit is estimated to hold about 1.6 trillion cubic feet (45 billion cubic metres) of gas and may be capable of producing more than 10 million cubic metres a day after 2015, one of the people said.
“It’s definitely good news, considering their overall gas production has been declining,” said Deepak Pareek, a Mumbai-based analyst at Prabhudas Lilladher Pvt, who has an “accumulate” rating for the stock. “The moot issue is the price this gas will be sold at.”
S K Srivastava, the regulator, didn’t answer two calls to his mobile phone seeking comment. Tushar Pania, a spokesman for Reliance Industries, said he couldn’t immediately comment.
The Reliance stock has gained 18 per cent this year, compared with a 19 per cent increase in the benchmark Sensex.
Gas output from the KG-D6 block is dropping after five of 18 wells in the main D1 and D3 producing areas were shut because of water and sand entering them. Output may drop further in the year beginning April 1 as Reliance and BP study a plan to revive the wells, reducing supplies to power utilities and fertilizer plants.
The Directorate General of Hydrocarbons, the regulator, is yet to approve the viability of three other smaller discoveries in the R-Series cluster, which lies within the KG-D6 block, the person said. Reserves at the R1 deposit are equivalent to about 14 per cent of the primary D1 and D3 fields, which have about 11.2 trillion cubic feet of resources, the person said.
Gas output from three areas in the KG-D6 block, where production started in April 2009, has fallen to about 36 million cubic metres a day, the person said.
Reliance said on January 20 gas production had dropped to about 38 million cubic metres a day in the three months ended December 31 from about 45 million cubic metres in the preceding quarter. A peak of 60 million cubic metres a day was reached in 2010 and output has slid since because of technical issues, according to the company.
Reliance and BP got approval to spend $1.5 billion to develop four discoveries in a cluster separate from the R-Series fields of the KG-D6 block, three people familiar with the development said on January 4. These discoveries can produce about 10 million cubic metres a day of gas, the people said.
|Reddy to visit KG-D6
Petroleum minister Jaipal Reddy will visit Reliance Industries’ KG-D6 block on Sunday. The news comes even as the company is under pressure to arrest the fall in gas production from the block. This will be the first time a petroleum minister would visit the biggest offshore gas-producing field. Reddy was scheduled to visit HPCL’s Vishakapatnam refinery to review its clean fuel project on Monday, an official said. Sunday’s visit to KG-D6 was later added to the itinerary. Senior RIL executives are expected to be present at the site during the minister’s visit.