Fall in RIL's reserves in KG-D6 questioned

Oil regulator DGH has questioned the 'drastic' cut in natural gas reserves at Reliance Industries' main gas field in the flagging KG-D6 block saying the downgrade was 'unprecedented and unconvincing.'

Reliance Industries Limited had in late-August filed a revised field development plan for discoveries Dhirubhai-1 and 3 (D1&D3) in KG-DWN-98/3 cutting gas reserves to 3.10 Trillion cubic feet from 10.03 Tcf approved in 2006.

The company based its reserve downgrade based on data of over three years of production.

The fields hit a peak of 55 million standard cubic metres per day (mmscmd) in August 2010 before the decline set in and are now producing less than 20 mmscmd.

Sources said the Directorate General of Hydrocarbons in its initial comments on the RFDP stated that 'such drastic reduction of reserves is unprecedented and unconvincing.'

DGH, they said, wants RIL and its partners BP plc to support the reserve downgrade with sufficient technical and geological data.

Originally, RIL had in 2004 estimated 3.81 Tcf of reserves in D1&D3, two of the 18 gas finds the company had made in the eastern offshore KG-D6 block. It had proposed an investment of $2.39 billion to produce 40 mmscmd.

The company revised the reserves to 10.03 Tcf primarily on the basis of its assessment of potential resources in area outside the main channel holding D1&D3

reserves. No wells had been drilled on the area outside the main channel to support the reserve assessment when RIL put an investment requirement of $8.8 billion to produce 80 mmscmd of gas.

Sources said RIL has in the RFDP, besides downgrading reserves, brought down the capital expenditure to around $6.2 billion saying it does not envisage drilling any wells on D1&D3 field.

DGH says RIL has drilled 22 wells out of the approved 31 wells.

Of the 22 wells drilled so far, 20 are in the main channel area and only two wells are drilled in periphery of the main channel.

As per the decision of 2006, RIL was to assess the upside potential of the gas reserves after at least one year of production from the field. D1&D3 started output in April 2009.

Minister of State for Petroleum and Natural Gas Panabaaka Lakshmi had yesterday told Rajya Sabha that D1&D3 had up to March 31, 2012 produced a cumulative 1.584 Tcf of gas.

Considering this, the actual downgrade should be from 8.446 Tcf to 3.10 Tcf.

Sources said DGH in its assessment of RFDP states that the development of area outside the main channel ares, as envisaged in approved plan of 2006, has not been carried out and no adequate technical justification has been provided.