The D6 block in the Krishna-Godavari offshore basin is a ‘golden block’, Robert Dudley, Global CEO of British Petroleum, said recently.
“We maintain a view of D6 as a golden block,” he told analysts in an earnings concall a few days back. (Dudley had described the block in exactly the same way in September last year.)
In February last year, BP bought 30 per cent stake in oil and gas assets owned by Reliance Industries Ltd that had in all 23 contracts to produce, for $7.2 billion. These included the prolific gas fields of K-G basin.
Wants pricing review
He noted that the block currently produces 1.1 billion cubic feet of gas per day from “only 350 sq km of the approximately 7,500 sq km” block.In addition to the already producing fields of D1, D3 and D26, there are 10 other discoveries within KG-D6, he said.
Dudley said that the block’s “already discovered gas” is of a volume of 5 trillion cubic feet. BP wants a review of pricing of the gas. At present, the price of the gas produced in the block is fixed at $ 4.20 per mBtu, which holds until April 2014.
“Today, the imported spot price is around $ 16,” Dudley said.
“Recognising that a transparent arms-length and competitive pricing framework is essential for India to enhance exploration and production activity and develop its own energy security, we see considerable potential for a more market-linked pricing regime to be in place post-2014,” he said.
$1.06 b capex for 2013
The KG-D6 Management Committee (which includes the Union Government representatives) approved a capital expenditure of $1.06 billion for 2012-13, with the bulk of it going for production and development of D1, D3 and MA fields.
It also approved the development of three other KG-D6 discoveries – D29, D30 and D31.
However, the costs involved in the development of these three will be recoverable only after a complete appraisal of the fields.
Government’s approval for development work before completion of appraisal implies that field development may be completed much earlier than in 2015-16, as estimated earlier, says a research report of Edelweiss Securities.
Edelweiss said it has assumed a capex of $350 million for 2012-13.
“We anticipate the higher-than-estimated capex may lead to a lower decline rate of production, more than offsetting the capex spend,” the report said.