Reliance Industries and UK’s BP Plc have proposed to a do a single confirmation test on three natural gas discoveries in KG-D6 block that have so far not recognised as commercial finds by the Oil Ministry.
The Directorate General of Hydrocarbons (DGH), the technical arm of the ministry, has since February 2010 not recognised the D-29, 30 and 31 as discoveries as RIL had not performed its prescribed tests to confirm the finds.
Sources said RIL-BP on October 8 proposed to a do a single Drill-Stem Test (DST) on the three finds to establish them as commercially viable finds.
DGH, however, wants three separate DSTs to be done on the three discoveries before approving their Declaration of commerciality (DoC). DoC is pre-requisite for any discovery to be development.
BP India head Sashi Mukundan last month wrote to the Oil Minister M Veerappa Moily saying the proposal to conduct a single DST in one of the three discoveries to physically substantiate flow as forecasted should be enough to establish commerciality of all the three finds.
The variation from the DGH proposal to have three DSTs, was suggested in order to minimise the project cost, he added.
He stated that internationally, the purpose of DoC is to notify the government that the contractor believes in the commerciality of a particular discovery and hence is willing to spend more money by progressing it to the next stage of development - engineering and preparing the field development plan (FDP) and developing the economic justification for the capital spend.
It is being progressed with zero cost to the government as all costs till the FDP is approved is borne by the contractor as ‘risk’ capital, he wrote, adding the three discoveries have resources of around 350 billion cubic feet which has the potential to add 5-7 million standard cubic metres per day (mmscmd) to the KG-D6 production in four-five years.
The three finds are part of the cluster that is called the R-Series in the eastern offshore KG-D6 block. RIL believes D-29, 30 and 31 together with the largest discovery in cluster, D-34 hold gross in-place reserves of 2.207 trillion cubic feet and the four could together produce a peak output of up to 20 mmscmd.
A block oversight committee headed by DGH, however, disassociated D-29, 30 and 31 and approved only D-34 with 1.267 tcf of reserves. D-34 alone can produce 14.68 mmscmd of gas from 11 wells for eight years on an investment of $2.338 billion.