RIL asked to fulfill its commitment in KG-D6

Unhappy with the fall in output at India's largest gas field, upstream oil regulator DGH has asked Reliance Industries to fulfill its commitment of drilling 22 wells in the KG-D6 field to boost production.

The Directorate General of Hydrocarbons (DGH) last month wrote to Reliance asking it to drill two more wells by April to meet its commitment of drilling 22 wells in the phase-1 development of the Dhirubhai-1 and 3 or D1 and D3 gas fields in the KG-D6 block, official sources said here.

The rate of natural gas production as per the approved Field Development Plan (FDP) should have been around 61 million standard cubic metres per day, but current output is about 51 mmscmd.

According to the FDP, Reliance was meant to put 22 wells in the D1 and D3 fields onstream by April, 2011, to achieve a production level of 61.88 mmscmd.

Sources said the situation on the ground is markedly different from what was promised. As of today, only 18 wells are in production. Output from these wells - at 43.44 mmscmd - is lower than the 53.4 mmscmd planned in the FDP.

Another 8 mmscmd is being produced from the MA oilfield in the same KG-D6 block. The DGH asked Reliance to expeditiously drill more wells to augment gas production to the level of the approved FDP, they said.

As per the FDP, production in the block is expected to go up to 86.92 mmscmd in 2013-14 and the output would start declining from 2018-19. The field is expected to produce for a total of 13 years, i.e. till 2022.

The current output of 51 mmscmd from the KG-D6 block is made up of gas output from the Dhirubhai-1 and 3 fields, known as D1 and D3, and the D-26, or MA oilfield. D1 and D3 have seen output fall from 53-54 mmscmd in mid-2010 to just over 43 mmscmd at present.

The MA oilfield in the same block is producing about 8 mmscmd of associated gas. Together, the current output from KG-D6 stands at 51 mmscmd.

Sources said that 18 wells have been drilled so far and completed out of 22 development or production wells approved in Phase-I of the FDP for the D1 and D3 fields.

Two more wells are complete, but not yet connected to the production system. The total investment in KG-D6 to date is $ 7.8 billion.

Reliance currently sells 14 mmscmd of gas to fertiliser plants, 24 mmscmd to power plants and the remaining 13 mmscmd to other sectors like sponge iron plants, LPG, city gas distribution (CGD), petrochemical plants and refineries.

It produces about 17,000 barrels of crude oil per day from the MA field. Reliance has so far made 19 oil and gas finds in Krishna-Godavari Basin Block KG-DWN-98/3, or KG-D6, which it won in consortia with Niko Resources of Canada under the first round of the New Exploration Licensing Policy (NELP) in 2000.

Of these, two gas (D1 and D3) and one oil (MA) discovery have been put on production. D1 and D3 commenced output from April 1, 2009, while MA started production from September 17, 2008.

Reliance has been forced to restrict production from the MA oil field to about 17,000 barrels per day due to high water and gas output, sources said, adding that the field was yielding more water than oil and that even 8 mmscmd of gas in comparison to oil output was considered quite high.

The MA field had five oil producing wells and one gas producer. Reliance has so far drilled 16 development or production wells in the D1 and D3 gas fields. Two exploration or probe wells have been converted into development wells.

Similarly, the company has turned two wells drilled for appraising discoveries into production wells. Of the total, 18 wells are connected to production facilities, while the remaining two are yet to be hooked up.

Reliance will have to drill two more wells to meet its commitment of 22 production wells by April, 2011, which would help it produce up to 60 mmscmd of gas from the D1 and D3 fields.

If Reliance works as per the plan, the cumulative output from the KG-D6 block will be 67-68 mmscmd in April.

Furthermore, four discoveries have been declared commercially viable, while the FDP for nine satellite finds was submitted on July 14, 2008, for approval.

The FDP for the nine satellite fields was not found techno-economically viable and Reliance submitted an Optimised FDP (OFDP) for four of these nine satellite fields on December 29, 2009.

The OFDP is under evaluation by the DGH. One discovery is under appraisal and Reliance has so far not submitted a declaration on the commerciality of two other finds.