DGH right in asking RIL to drill more wells: Reddy

Oil Minister S Jaipal Reddy today said upstream regulator DGH was right in asking Reliance Industries (RIL) to drill more wells on the eastern offshore KG-D6 fields where natural gas output was fallen due to sub-surface issues.

"Reliance was to drill more wells according to the field development plan [that was approved in 2006]. So, our DGH asked Reliance to get more wells drilled. That was in conformity with the FDP," he told Economic Editors Conference here.

The company had committed to drilling 22 wells in the first phase of development of Dhirubhai-1 and 3 gas fields in the KG-D6 block. Of these, it had drilled 20 when it observed the reservior was not behaving as per the previous projects and per-well output was declining.

It halted drilling to do more studies but DGH insisted that Reliance complete its target. The company complied and the results were not encouraging. It drilled two almost dry wells that are incapable of producing commercially viable volumes of gas.

Since last year, Reliance has witnessed a drastic drop in reservoir pressure and water ingress in its gas producing wells, leading to a drop in output from 61 million standard cubic metres per day to less than 44 mmscmd, instead of rising as planned to over 70 mmscmd.

The firm wanted to carry out more geological and reservoir studies and induct better technology before drilling more wells, but the Oil Ministry, on the advice of its technical arm, the DGH, has ordered RIL to drill 9 wells of the phase-II by March next year.

Reddy said there are risks in exploration business. "There is an element of geological uncertainty."

"DGH [Directorate General of Hydrocarbons] did the right thing because that was requirement of field development plan [FDP] which had been approved," he added.