Reliance Ind, partners search for hydrocarbons in East Timor ‘disappointing'

Reliance Industries Ltd and its public sector partners — Indian Oil Corporation Ltd and Oil India Ltd — have not been able to find hydrocarbons in their first attempt in the offshore oil block in East Timor.

Industry sources said the companies are at present doing the post-well drill analysis, which will help them in establishing the main reasons for not being able to establish hydrocarbons. According to guesstimates, deepwater drilling costs in this block is about $80-85 million. Under phase-I, in three years of the exploration activity the companies were to undertake three-dimensional seismic surveys and drill one exploratory well in the East Timor block.

The first well was spud in December 2010 and the task was completed in January 2011, sources told Business Line . In its annual report for 2010-11, RIL has said that drilling campaign in blocks in Oman and East Timor has not been encouraging. Accordingly, expenditure incurred on these blocks amounting to $177 million has been fully provided for in the books of its wholly owned subsidiary – Reliance Exploration & Production DMCC (REP DMCC), the company said.

Though the consortium of IOC and OIL have been working together in acquiring hydrocarbon acreages abroad, in 2007, for the first time the two joined hands with RIL for this block. Both IOC and OIL have 12.5 per cent equity stake each in the project. RIL holds majority stake and is the operator of the area spread over 2,384 sq km. When acquiring stake in this block, IOC and OIL had made a financial commitment of $27 million.

Acquiring participating interest in exploratory blocks is termed as farm-in activity, which is a common feature among the global oil and gas exploration companies. This allows an entity to come in as a partner. As a farm-in partner, a company is not required to acquire the asset directly, but develop the property by taking participating interest in the block. The company also shares the risk involved in the exploration activity with the operator.

In May 2006, RIL had won a block in East Timor — area ‘K' — after bidding for two of the 11 offshore blocks tendered. RIL has now signed an agreement to explore for oil and gas in East Timor and will explore the offshore area in contract area ‘K' that has proven reserves in the Australian North West Shelf and is adjacent to the Timor Sea.