Ramping up gas output from Reliance Industries Ltd-operated KG-D6 block is set to get pushed back by a year to 2018-19. This is because of the Government’s delay in announcing the new gas price.
RIL and its foreign partners in the block, BP and Niko Resources, have decided to go slow on investments, including proceeding with the R-cluster development project in the block. R-cluster is a series of small fields in the block being developed together.
Earlier this month, in a statement, Niko had said, “The company and its partners will not make investments in (KG D6) planned development projects without achieving the pricing as provided in the production sharing contract to provide adequate returns on the investments.”
The partners hoped to add five million standard cubic metres a day (mmscmd) initially (2017-18) and subsequently 10 mmscmd to the current output with R-Cluster. At present, the combined output of three producing fields in the block D-1, D-3 and MA is 13.05 mmscmd (D-1, D-3 about 8.05 mmscmd and MA 5 mmscmd).
RIL-BP-Niko attracted both Government and public ire for not being able to control the falling output from the country’s largest producing gas fields after it had hit a peak of 61 mmscmd.
“Though the Government has said that will put in place new pricing for domestically produced natural gas by end September, the contractors need at least six months leap period to order equipment and receive them to undertake exploratory activities. In fact, the time required could stretch to 8-9 months depending on the order book of the vendors,” said one of the contractors.
Besides, a common concern among both public and private sector contractors involved in this sector is that if the gas price is increased only to $6 a unit (gas is measured in million British thermal units) then, the increase is just absorbed within the system without any significant increase in production.
“The whole purpose of increasing gas price is lost,” a public sector player said.
The Government is working on a uniform gas price which will be much easier to administer, an official said. Currently, gas from KG-D6 block is sold at $4.2/unit (at landfall point).
The contractors under the KG-D6 block enhancement plan are looking to invest over $5 billion in next three to five years in a series of projects to develop around 4 trillion cubic feet (tcf) of discovered natural gas resources in the block.