RIL agrees to drill 3 more wells at D6

Reliance Industries (RIL), which has been under attack from the Directorate General of Hydrocarbons (DGH) for not meeting drilling commitments for its flagship D6 block in the Krishna Godavari (KG) basin, has agreed to do so. It has written to DGH committing it will immediately start drilling three wells.

“We have received a letter from RIL that it has decided to drill three development wells at D6 to assess the reservoir characteristics,” said a senior DGH official.

An email to RIL remained unanswered.

DGH, unhappy with the fall in gas production from the block, had in February asked RIL to drill two more wells by April to meet its commitment of drilling 22 wells in D1 and D3 fields. It also asked RIL to drill another nine wells by the end of the financial year to increase gas output.

“We have been given to understand that RIL has moved the rig Dhirubhai Deepwater KG-2 to the D6 block for drilling,” said the official.

Gas production from the field has been falling. The field is producing 46 million standard cubic metres per day (mscmd).

According to the approved field development plan (FDP), the production should have been around 61 mscmd.

According to the FDP, the block is expected to produce up to 86.92 mscmd in 2013-14. The output will start declining from 2018-19. The field's life is 13 years, till 2022. Canada’s Niko Resources owns 10 per cent in the block.

At present, RIL sells 14 mscmd to fertiliser plants, 24 mscmd to power plants and the remaining 13 mmscmd to sponge iron plants, petrochemical plants, refineries and LPG and city gas distribution companies.

In May, RIL cut supply to steel, petrochemical and refining sectors after the government asked it to give priority to fertiliser, LPG, power and city gas distribution companies. Following this, Welspun Maxsteel, Ispat Industries and Essar Steel moved courts for a stay.

Essar has been allocated 3.2 mscmd, while Welspun Maxsteel and Ispat Industries have together been allotted 1 mscmd on a firm basis. A firm allocation, as against a fallback option, is considered more definite, as the buyer has a right on the gas produced.

To meet its captive demand, RIL is buying regassified liquefied natural gas from Royal Dutch Shell and Petronet LNG at double the D6 gas price.

The government had allowed RIL to use gas from the K-G basin (all gas use and pricing has to be approved by the petroelum ministry). RIL has a firm allocation of 1.9 mscmd for its Gandhar and Nagothane petrochemical plants in Gujarat. Its Jamnagar refinery has been allocated 2.34 mscmd.