DGH rejects RIL offer to confirm gas discoveries in KG-D6

Under pressure from DGH, Reliance Industries has agreed to do separate tests to confirm three natural gas finds in the KG-D6 block but the regulator is not impressed and wants the discoveries to be taken away from the company.

The Directorate General of Hydrocarbons (DGH), the technical arm of the Oil Ministry, has since February 2010 not recognised the D-29, 30 and 31 as discoveries as RIL had not performed its prescribed separate tests to confirm the finds.

RIL on May 2 agreed to do three separate drill-stem tests instead of a single test it had proposed last year and sought approval for $ 93 million spending in the current fiscal.

     
In response, DGH Director General R N Choubey on May 10 wrote to Oil Secretary Vivek Rae saying "the time period for submission of DOC (Declaration of Commerciality) for the three gas discoveries ie D-29, 30 & 31 has already expired".

     
When RIL had last year proposed a single test to establish the three finds, DGH had insisted that the company should do three separate tests on the three discoveries.

"There is no provision in the Production Sharing Contract (PSC) to allow additional appraisal time beyond the stipulated appraisal period. Additionally, the exploration period of the block is already over," it wrote on May 10.

     
Choubey reminded Oil Secretary of DGH recommendation of asking RIL to relinquish 6,601 square kilometre or 86 % of the total 7,645 sq km area in the KG-D6 block as the firm has overshot the time allotted to it for developing the area.

     
The area DGH wants RIL to give up includes the three finds as well as five other discoveries with at least 1.15 trillion cubic feet of known recoverable gas reserves valued at $ 4.83 billion at current prices."The proposed cost of carrying out DST (drill-stem tests) in the three wells ($ 93 million) is also a matter of concern as this expenditure could have been avoided had the testing in the wells been carried out at the time of discovery itself as per PSC requirement," Choubey said.

   
DGH advised the Ministry to take "a suitable decision on the operator's (RIL's) proposal to under DST in 3 wells which will amount to extension of appraisal period for which there is no provision, and which will have a bearing on relinquishment of balance area".

RIL believes D-29, 30 and 31 together with another find the R-Series cluster, D-34 hold gross in-place reserves of 2.207 Tcf and the four could together produce up to 20 million standard cubic meters per day of gas.

     
A block oversight committee headed by DGH, however, segregated D-29, 30 and 31 and approved only D-34 with 1.267 tcf of reserves that can produce 14.68 mmscmd of gas from 11 wells for eight years on an investment of $ 2.338 billion.

     
RIL-BP believes the three discoveries have resources of around 350 billion cubic feet which has the potential to add 5-7 mmscmd to the KG-D6 production in four-five years.