RIL's KG-D6 output slips to 10 mmscmd

The current output is sharply lower from the 60 mscmd production at the end of 2010

Reliance Industries today said natural gas production from its eastern offshore KG-D6 block has slipped further to about 10 million standard cubic meters per day.

"It (production) is about 10 mmscmd," B Ganguly, Chief Operating Officer of RIL's exploration and production business, said at the 3rd World Energy Summit here.

The present day production is made up of output from Dhirubhai-1 and 3 gas fields as well as MA oil and gas field, he said. In November, it was about 12 mmscmd.

RIL blames geological complexities like high water and sand ingress in wells as well as larger than anticipated drop in reservoir pressure for the fall in output from close to 70 mmscmd achieved in March 2010.

The government however believes that the output fell because the company did not drill the wells as promised when it got a $8.8 billion investment plan approved for the D1&D3 fields in 2006. It sees the non-drilling of wells as a default in contractual obligation and has slapped a $1.797 billion penalty on it.

These reasons have led to shutting of 10 out of 18 gas wells on D1&D3 fields and a third of those on MA.

KG-D6 fields, which began gas production in April 2009, had hit a peak of 69.43 mmscmd in March 2010 before water and sand ingress shut down of wells after wells.

This peak output comprised of 66.35 mmscmd from D1&D3, the largest of the 18 gas discoveries on the KG-D6 block, and 3.07 mmscmd from MA field, the only oil discovery on the block.

Besides the fall in output from D1&D3, gas production from MA field, which had hit a peak of 6.78 mmscmd in January 2012, too has dropped.

Asked about the fresh $792 billion penalty that the government slapped for producing less than the target in 2012-13, Ganguly said the issue will be part of the arbitration RIL had initited against the previous $1.005 billion penalty imposed for output being less than target in 2010-11 and 2011-12.

"It is part of the existing arbitration," he said.

D1&D3 fields have in the first fours years of production (2009-10 to 2012-13) produced a total of 1.853 Trillion cubic feet of gas, 1.196 Tcf short of 3.049 Tcf that RIL had committed to produce in the 2006 development plan.

But for the first year, the output has lagged the targets in all subsequent years, which has led to a huge chunk of facilities built lying untilised, according to oil ministry.

RIL had built facilities to handle 80 mmscmd of gas.

The company says it did not drill the committed quota of wells as gas reserves are a third of 10.03 Tcf estimated in 2006. It says the production sharing contract does not provide for levy of penalty for producing less than output estimates.