D6 satellite development approvals: RIL sends SOS

Fearing it may lose one full year because of delays in regulatory clearance, RIL has sent an SOS to the Oil Secretary seeking urgent intervention in the grant of approvals for development of satellite fields to offset the dip in output from the main gas fields in the KG-D6 block.

RIL executive director P M S Prasad on November 25 wrote to Oil Secretary G C Chaturvedi highlighting five critical issues, including approval of pre-development activities for satellite and R-series fields in the KG-D6 block, which have been awaiting the nod from the Oil Ministry and its technical advisor, the Directorate General of Hydrocarbons.

"While concern is being repeatedly expressed about the fall in production from the D1; D3 fields (in KG-D6 block), we find that all our proposals for augmenting production from other finds do not seem to be making much headway," he wrote.

RIL's $1.529 billion investment plan for bringing four satellite fields around the flagging D1&D3 gas fields to production has been awaiting approval since 2009 and now the ministry and DGH want the costs to be reworked in view of changed prices.

The company, in the meantime, wanted to carry out $73 million worth of pre-development activities in the limited weather window available in Bay of Bengal from December to March, 2012, and adjust this cost in the approved field development plan.

Prasad said the pre-development activities were required to gather enough/more data and information in order to make an informed development plan.

"However, in spite the requirement of such information is clearly provided in the Production Sharing Contract as well as past precedent in the matter, government nominees on the Management Committee (that overseas operations of KG-D6 block) are now insisting that pre-development

activities are not covered in the PSC," he wrote.

If the approvals don't come, the company would lose the four-month weather window and would then be forced to wait for one full year to begin work.

"While as investors we do need to monetise our discoveries as soon as possible, even for the sake of the country, if more gas has to be brought into production and quickly, it is imperative that government nominees consider themselves equal partners in development and not see themselves as adversaries to the contractor," he wrote.

Prasad said even though the PSC provides only an 'advisory role' to MC to only 'review' commerciality of a discovery and does not confer it with the right to 'approve', the DGH has been refusing to review the Declaration of Commerciality for the D29, D30 and D31 finds in KG-D6 block since February, 2010.

"Knowing that these discoveries are in deep water blocks and not viable as standalone discoveries, failure to develop them with ongoing operations may result in these discoveries being rendered non-commercial forever," Prasad wrote.

The four satellite and R-series fields can together produce at least 30 million standard cubic metres per day to supplement the current output of less than 40 mmscmd.

The current output is 50 per cent lower than the target.

"I, therefore, request your intervention to ensure that narrow interpretations are not allowed to come in the way of facilitating the important task of augmenting production as quickly as possible," he added.

"It is in the spirit of wanting to work together with the government that I am requesting your kind directions on these issues."