Reliance Industries’ proposal for appointing an independent consultant to assess the reasons for the drop in output at its KG-D6 block has been rejected by the block oversight committee.
This once again brings to the fore the differences among members of the committee, which comprises nominees of the Directorate General of Hydrocarbons, the Government, and Reliance-BP-Niko.
An oversight, or management, committee supervises the operations of the block.
The DGH and the Government nominee have not been buying Reliance’s arguments for the steep drop in output from the D-1, D-3 fields in the KG-D6 block.
The output at largest producing fields in the block (D-1 and D-3) has declined significantly due to what the operator calls a ‘technical snag’.
After hitting a peak of 61 mmscmd in 2010, the output is now down to roughly 10 mmscmd.
An official privy to the development said: “The reason for declining the request (for an independent consultant) is simple. The production sharing contract (signed between the contractor and Government to operate the field) has no such provision.”
A draft resolution of the meeting conveying this decision has been sent to RIL and its partners, BP and Niko, last Friday.
The meeting was held on October 1. Once Reliance signs the resolution or returns it unsigned, the Government can be approached under the appeals provision of the production sharing contracts.
The Government can then take a call on appointing an international consultant.
Another official said that “the oversight committee’s decision will actually work in favour of RIL and its partners, as the Directorate General of Hydrocarbons and the contractors were not on the same page as far as the reasons for the drop in output are concerned.”
Sources close to Reliance said the contractors (RIL-BP-Niko) were yet to take a call on the draft resolution sent by the DGH.
While agreeing that the production sharing contract is silent on the issue of appointing an international expert, sources say, “it does not mean it debars such a move. It is open to interpretation.”
According to the agenda for the October 1 meeting, the committee was to consider appointing an international expert in case of differences between the members on the gas reserves and what is recoverable from the gas fields. At the meeting, a technical presentation was made by Reliance and its partners.
Reliance and its partners suggested four third-party experts to assess the drop in output from D1, D3 fields. The names were reservoir consultants Ryder Scott (Houston/Calgary), DeGolyer and MacNaughton (Dallas), Gaffney, Cline & Associates (London/Calgary), and Netherland, Sewell & Associates (Dallas).