Officials warn of further fall in RIL gas output from KG block

A day after the news broke on Reliance Industries Ltd (RIL) reaching a new dip in gas production in the next financial year, officials said the company anticipated a further fall to 22.6 million standard cubic metres a day (mscmd) in 2013-14 from the current 35 mscmd.

Production in the D6 block of the Krishna-Godavari basin (KG-D6) is expected to drop to about 27 mscmd by April-May, owing to sand or water entering the wells. The company has informed the Directorate General of Hydrocarbons that a further fall is expected in the following year.

RIL, selling gas at a government-determined price of $4.2 a million British thermal unit, is also expecting a rise in the price in 2014. RIL is the operator of the block, with 60 per cent stake. BP bought another 30 per cent from RIL while Niko Resources is the original partner, with 10 per cent participating interest in the block.

According to the projections, about 14 mscmd is expected to be produced from the D1 and D3 gas fields, while another 8.6 mscmd is expected from the MA field in the same block. RIL began production from KG-DWN-98/3 or the KG-D6 block in April 2009.

Production from the block reached about 30 mscmd within months of starting production and touched 61.5 mscmd in March 2010. Today, D1&D3 produce about 27.5 mscmd and the MA another 7 mscmd.

The official said output from KG-D6 was short of the 70.39 mscmd (61.88 mscmd from D1&D3 and 8.5 mscmd from the MA field) level envisaged in the field development plan approved in 2006. Production had been scheduled to touch 80 mscmd by April 2012.

The fall forced the government to order supply cuts to non-priority sectors in May 2011. A petition filed by Welspun Maxsteel, Vikram Ispat and Essar Steel challenging the order is pending in the Supreme Court.

RIL has so far drilled 22 wells on Dhirubhai-1 and 3, two of the 18 gas finds in the KG-D6 block that have been brought to production. Of these, five have stopped production due to water/sand ingress. The MA oilfield in the same block had seen one out of the five wells cease production due to the same reason.

The scrip on the Bombay Stock Exchange closed 1.4 per cent down on Wednesday, at Rs 836.05 a share.