DGH asks oil ministry to take back 3 RIL gas finds

The Directorate General of Hydrocarbons (DGH), the technical arm of the ministry of petroleum and natural gas, has recommended that three gas discoveries reported by Reliance Industries Ltd (RIL) in the KG-D6 block off the east coast be taken away from it for failure to conduct separate tests for their commercial viability.

DGH rejected a delayed offer by RIL to conduct separate tests to confirm commercial viability of each of these finds that date back to February 2010.

RIL had, on 2 May, agreed to do three separate drill-stem tests (DST) on these wells, instead of a single test it had proposed last year, and sought approval for spending $93 million in FY'14.

DGH had denied recognition to RIL's D-29, D-30 and D-31 finds since February 2010 as commercial discoveries since RIL did not conduct separate tests as prescribed in the production sharing contract for confirming the gas finds.

"The time period for submission of DoC (declaration of commerciality) for the three gas discoveries has already expired," DGH director general R N Choubey wrote to oil secretary Vivek Rae on 10 May, adding that when RIL had last year proposed a single test to establish the three finds, DGH had insisted that the company should do three separate tests.

"There is no provision in the production sharing contract to allow additional appraisal time beyond the stipulated appraisal period. Additionally, the exploration period of the block is already over," Choubey wrote.

In fact, Choubey pointed out, RIL should relinquish 6,601 sq km, or 86 per cent of the total 7,645 sq km area in the KG-D6 block, as the developer has overshot the time allotted to it, as per DGH's previous recommendation.

This includes the D-29, D-30 and D-31 finds as well as five other discoveries with around 1.15 trillion cubic feet of known recoverable gas reserves.

"The proposed cost of carrying out DST in the three wells, $93 million, is also a matter of concern as this expenditure could have been avoided had the testing in the wells been carried out at the time of discovery itself as per PSC requirement," Choubey said.

DGH has suggested that the ministry take "a suitable decision on the operator's proposal under DST in 3 wells, which will amount to extension of appraisal period for which there is no provision, and which will have a bearing on relinquishment of balance area".

RIL claims that D-29, 30 and 31 together with another find in the R-series cluster, D-34, hold gross in-place reserves of 2.207 Tcf and the four could together produce up to 20 million standard cubic meters of gas per day.

The oversight committee headed by DGH, however, approved only D-34 with 1.267 tcf of reserves that can produce 14.68 mmscmd of gas from 11 wells for eight years on an investment of $2.338 billion.

According to RIL (more specifically RIL-BP), the three discoveries have reserves of around 350 billion cubic feet.