Concerned over the fall in output at India’s biggest gas field, the Directorate General of Hydrocarbons (DGH) will summon Reliance Industries to seek explanation on its failure to meet the drilling commitments that were a few years back used to justify over $8.8-billion expenditure on KG-D6 field.
In 2006, the company won the Government nod to invest $8.836 billion on its eastern offshore KG-D6 field after promising to produce 61.88 million cubic meters per day of gas from 22 wells by April 2011 and 80 mmscmd from 31 wells by 2012.
But the situation on ground has been markedly different with Reliance producing about 42 mmscmd from 16 out of the 18 wells drilled so far on Dhirubhai-1 and 3 (D1 and D3) field in the KG-D6 block, the DGH Director-General, Mr S.K. Srivastava, told PTI.
Another 8 mmscmd is being produced from MA oilfield in the same block, taking the total output to around 50 mmscmd against the committed 69.88 mmscmd, he stated after a review meeting the Oil Ministry had called on Thursday evening.
“The reasons they have so far given (for not fulfilling their commitment) are far from convincing. We intend to call Reliance and its partner Niko Resources (of Canada) in the first week of May to explain the failure to meet commitments,” he said.
Reliance says the output has dipped after touching 61.5 msmcmd achieved in March last year on falling pressure at the wells and that drilling more wells will not help the problem as it will tap the same resource.
Mr Srivastava said Reliance has not kept up with the approved field development plan (FDP) but stopped short of saying what action the Government can take against it.
“We will come to that stage (imposing penalties or taking action) after hearing Reliance,” he said.
Reliance has drilled two more wells but not yet connected them to the production system. DGH wants Reliance to drill 11 wells this fiscal, including the two wells that were to be drilled last year.
In 2007, allegations of gold-platting or inflating the cost were levelled against Reliance when it jacked up the investment required for developing D1 and D3 gas field to $8.8 billion from $2.47 billion proposed in 2004.
Reliance, which is allowed to recover all the capital and operating expenditure from sale of gas before sharing profits with the Government, had denied all allegations saying the cost of drilling 31 wells had gone up since 2004.
It had also used the high cost involved to justify the $4.205 per million British thermal unit price fixed for natural gas produced from KG-D6 fields.
The company holds 90 per cent interest in the KG-D6 block, where 18 gas and one oil discovery has been made. D1 and D3 gas and MA oil finds have so far been put into production. Niko has the remaining 10 per cent in the block.