RIL fails to meet gas commitment

Reliance Industries Ltd (RIL), the operator of the country's biggest gas field, KG-D6, has not met its commitment on drilling gas wells, the government's upstream oil regulator said.

Reliance had committed to drill 22 wells in the Dhirubhai-1 and 3 fields or D1, the largest of 18 gas discoveries in the block KG-DWN-98/3 or KG-D6 block in the Bay of Bengal, by April 2011 to produce 53.4 million standard cubic meters of gas per day (mscmd).

Another 8-9 mscmd output was to come from MA oilfield in the same block, taking the total output committed in the Field Development Plan (FDP) to 61.88 mscmd by April 2011.

Earlier this month, RIL projected the gas output from D1 and D3 gas fields will fall to 38 mscmd in 2012-13.

Against its commitment, RIL has so far drilled and completed 18 production wells on D1 and D3 fields giving a combined output of about 42 mscmd, Director General of Directorate General of Hydrocarbons (DGH) S K Srivastava said.

Besides, two other wells have been drilled but not connected to the production system.

"It has to drill two more wells by April," he said, but did not say what action the government or DGH can take if Reliance failed to honour its commitment.

Output from KG-D6 is to hit peak of 80 mscmd by 2012-13, with the company drilling a total of 31 wells.

D1 and D3 gas fields and MA oilfield are currently producing about 50 mscmd, lower than 61.5 mscmd output the block had achieved in March 2010.

"This fall in the output of KG-D6 has been reported. Our DG, DGH, is in contact with the operator (Reliance) of KG-D6... We do not know about the reasons for the fall... It is a technical issue… We are in correspondence with Reliance... We are in contact with them," said Oil Minister S Jaipal Reddy.

Asked about the action government can take against RIL for not meeting its commitment, the minister said the question was "hypothetical".

When asked about what the government plans to do with regard to demand of crucial sectors like fertiliser and power if gas output continues to fall, he said the government will follow the priority line-up laid down by a group of ministers.

The government, through its gas utilisation policy, has made allocations to various priority sectors like power, fertiliser, steel, city gas, refineries, petrochemicals, LPG and captive power.

The power sector has been allocated 31.165 mscmd of gas on a firm basis and another 12 mscmd of gas on fall-back basis.

The fertiliser sector has been given firm allocation of 15.508 mscmd, refineries have been given 5 mscmd of firm allocation and 6 mscmd of fall-back allocation and the steel sector has been given 4.19 mscmd firm allocations.

A fall-back allocation implies that the sector will get gas if the firm allocation of other sectors is not fully consumed due to some reason.