Reliance's D6 block may finally start yielding gas

Gas production at Reliance Industries' KG-D6 block showed some signs of improvement with a new well starting to yield more gas after the operators shut down an eighth well in the gas block in the east coast.

Activity at the D6 block gathered pace after the petroleum ministry said the CAG will conduct its audit of the D6 block on the basis of the production sharing agreement between Reliance and the oil ministry.

RIL and its partners BP and Niko Resources are expected to report fresh gas discovery in the existing field if initial signals from MJ1 are any indication.

RIL-BP-Niko started drilling in the new well on 1 March and initial assessment showed that the area could hold significant gas potential.

The drilling is likely to get over in a week or so, after which the contractors will do the testing, to know the true potential, sources said.

Any official announcement of the discovery will be made only after full confirmation of the gas potential there, sources said.

The D6 block in the Krishna-Godavari basin in the east coast of India has been drawing public criticism because of its falling output. Gas production in the once prolific gas field, which hit a peak of 60 mmscmd in end-2009,has now come down to around 15 mmscmd.

Exploration activity at the D6 block has been at a standstill following a row between the petroleum ministry and the operator over the continued spending on the block without any result.

RIL is reported to have invested billions of dollars on the KG-D6 block even as gas production from the area steadily declined from its peak 60 mmscmd in end-2009 to around 15 mmscmd at present.

RIL insisted on continued development of new wells in the block even as gas production there continued to decline.

Since then RIL sold a 30-per cent stake to BP for technology sharing. Drilling activity, however, continued to remain at a standstill due RIL's continued objection to the CAG conducting a performance audit on a private entity.

The petroleum ministry, meanwhile, started to mediate between CAG and Reliance Industries over the scope and extend of the audit.

The CAG wanted the petroleum ministry not to give any go-ahead to RIL's D6 investment plans till the operator agrees to unconditional audit.

However, with the petroleum ministry's intervention, the issue has been resolved and the CAG will now conduct the audit as per the production-sharing contract.