DGH wants Reliance’s NEC discovery reserves dowsized

In a fresh blow to Reliance Industries, the Directorate General of Hydrocarbons (DGH) has rejected two discoveries.

According to CNBC-TV18, the rejected discoveries are said to be located in the NEC 25 offshore in the Bay of Bengal, in which RIL holds 90 per cent interest with Canada's Niko holding the remaining10 per cent.

RIL had claimed 0.7 (trillion cubic feet) TCF of recoverable reserves in the two wells. The directorate however is not convinced and wants the reserves to be downsized to 0.3TCF for which RIL would have to submit a fresh proposal to DGH.

During its March review, the directorate had found fault with RIL's commitment to boost production at another block, KGD. 

According to the DGH the government's share of profit from the gas has been hit due to RIL's tardiness and has directed the company to drill more wells.

Meanwhile, according to the report, the directorate has asked Reliance to cut its  capex which it believes to be overestimated for 2010-11 and 2010-12. 

The report citing unnamed sources says the estimated budget that was submitted by RIL to the DGH was in excess of around a billion dollars, almost $1.5 billion but this has been rejected by DGH on grounds that RIL's output right now is lower than what had been approved as per the field development plan. The output right now stands at 43 to 44MMSCMD.

RIL has drilled 18 wells that are falling behind the target.