RIL says DGH shifting goalposts to strip off its discoveries

Regulator wants 1,130 sq km area, containing 8 assets holding 1.15 tcf, over and above 5,367 sq km offered by RIL

Reliance Industries Ltd (RIL) has accused oil regulator DGH of shifting goalposts to strip off 8 gas discoveries holding 1.15 trillion cubic feet of reserves worth $14 billion from its eastern offshore KG-D6 block.
    
RIL as per contractual requirement of retaining only the area where discoveries have been made, had offered to give up or relinquish 5,367 square kilometers out of the total 7,645 sq km area in the block.
    
But the Directorate General of Hydrocarbons (DGH) wants another 1,130 sq km of area, which contains the 8 discoveries, to also be taken away from RIL on the grounds that the time line to develop the fields had expired.

     

RIL in a presentation to Oil Minister M Veerappa Moily and his top ministry brass last month, said it had not deviated an inch from the Production Sharing Contract (PSC) and had the right to retain the 1,130 sq km area.
    
If DGH is to carve out this area and auction it, the new company will not be able to produce from these before 8-10 years, it said.
     
RIL on the other hand plans to integrate the finds, which are small or marginal in nature and "unviable" on standalone basis, with other finds in the block and produce by 2017-18.

    
Of the eight discoveries in 1,130 sq km area, the DGH refused to consider investment plans for five, with 0.805 Tcf of reserves, saying they were not viable at the current price of $4.2 per million British thermal units.
    
The regulator refused to recognise the other three as discoveries in the absence of prescribed tests to confirm them and then disallowed pleas by Reliance and partner BP Plc for time to do the tests.
     
RIL said the declaration of commerciality (DoC) - a prerequisite before investment plans are considered - for D-29, 30 and 31 was "submitted in February 2010 and DGH raised requirement of DST (Drill Stem Test) after 8 months of DoC submission and around 40 months from discovery well."

    
"PSC also leaves selection of testing to the contractor's best technical judgment. Contractor conducted Modular Dynamic Test (MDT) and is of the opinion that DST is not required," it said, adding that to resolve the impasse and to expedite development of resources it has offered to carry out DST as well.
    
For the balance five finds (D4, 7, 8, 16 and 23), it said DGH in March 209 found $4.2 price "uneconomical" for their development along with five other discoveries and asked RIL to optimise the field development plan.
     
RIL in December 2009 submitted a optimised field development plan, proposing to develop four finds (D2, 6, 19 and 22) first and balance 5 (D4, 7, 8, 16 and 23) later and disagreed with evaluation of $4.2 per mmBtu.

     
It said the development plan was neither denied nor withdrawn and so area of the five discoveries is valid and cannot be taken away.