RIL to give up 4,266 sq km of KG-D6 block

Offer comes at a time the ministry was readying an order asking the firm to vacate about 5,970 sq km area of KG-D6 block

Reliance Industries has offered to relinquish about 55% of the 7,645 square kilometre KG-D6 block in Bay of Bengal, much less than the area that the Oil Ministry wants the company to contractually vacate.

RIL this week wrote to the ministry offering to give away 4,266 sq km of the Krishna Godavari basin block, sources privy to the development said.

The offer was made just as the ministry was readying an order asking the firm to vacate some 5,970 sq km of area of KG-D6 block.

Contractually, companies are required to relinquish 25% of the area in an oil and gas block at the end of first phase of exploration that spans some three years.

At the end of second phase, 50% of the area is to be given up and by the third phase only such area is allowed to be retain where the company has made a discovery and is required for development and production of the same. The second and third phase are of two years duration each.

RIL and its partner Niko Resources of Canada were awarded the KG-DWN-98/3 or KG-D6 block in 2000. The three-year Phase-1 ended on June 7, 2003 while the 2-year Phase-II exhausted on June 7, 2005. The third phase ended on June 7, 2007.

Sources said upstream regulator DGH in 2006 agreed to RIL proposal of declaring the entire 7,645 sq km as discovery area, thereby allowing the company to retain the full area. The decision was ratified by a committee headed by Additional Secretary in the Ministry and by the Oil Minister thereafter.

The decision came in for sharp criticism from CAG as at the end of the third phase, only 79% of the block area was covered by 3D seismic survey and yet the entire area was declared a discovery area.

CAG in its performance audit in 2011 had asked that Ministry to review determination of entire contract area of KG-DWN-98/3 (KG-D6) as 'discovery area'.

In the aftermath of the CAG criticism, the Directorate General of Hydrocarbons (DGH) recommended to the ministry that RIL should be informed that an area of 5,970 sq km is treated as having been relinquished in the first instance.

Sources said the ministry had not yet served the relinquishment order on RIL.

RIL-Niko have made 18 gas and 1 oil discovery in KG-D6 block. Of these, the largest gas finds, Dhirubhai-1 & 3, were brought into production in April 2009 and the oil discovery, MA began pumping in September 2008.

Development plan for most of the satellite finds has either been approved or is under consideration of the authorities. Three finds however have not yet been declared commercially viable.

KG-D6 output has dipped from 69.43 million standard cubic meters per day achieved in March 2010 to under 17 mmscmd this week.