The Directorate General of Hydrocarbons (DGH), India's upstream oil watchdog, has refused to recognise two significant natural gas discoveries that Reliance Industries (RIL) had made in a Mahanadi basin block, because the company failed to conduct the prescribed tests to ascertain the find, according to a Reuters report.
The DGH in March this year told RIL that the Dhirubhai 32 and 40 (D-32 & D-40) gas finds in the Mahanadi basin block NEC-25 cannot be recognised as a discovery because RIL had not carried out drill stem tests on them, the agency said citing unnamed sources.
RIL says the two finds, on which it had conducted other tests, may hold 663 billion cubic feet of gas reserves and can produce 170 million metric standard cubic feet a day from six wells.
It had proposed an investment of $1.17 billion in developing the finds and another $23.5 million annual operating expenditure in producing 476 billion cubic feet of gas over the life of the field.
The sources said RIL wrote to DGH seeking a re-look at the declaration of commerciality (DoC) of D-23 and D-40 finds, but the upstream regulator turned that down saying without DST tests it cannot declare the two finds commercially viable.
DoC is a pre-requisite for developing a find, and unless the regulator and the government give DoC, no operator can invest any money.
The DGH told the company that the two discoveries had already been reviewed and rejected by the block oversight committee or 'management committee', headed by a DGH official and including petroleum ministry representatives.
RIL, the operator of NEC-25, had asked DGH to reconvene a meeting of the committee so that the two finds could be recognised.
It had argued that the refusal to recognise the two discoveries was delaying gas production from the block. To expedite the development of the block, RIL said it was necessary that the DoCs were issued at the earliest.
According to the report, RIL claimed that the DST was not a conclusive test for a discovery, as it provides information only on the initial production rate around the wellbore and not on the sustained field production rate.