Will RIL gas reserves at KG-D6 only last another 8 years?

Reliance Industries is in for some tough time. British Petroleum has brought out an estimate that the proven reserves at the gas block of KG-D6 are just 1.4 trillion cubic feet (tcf). This estimate is almost a fifth of what Niko Resources, a partner of RIL in KGD6 for 12 years now, had estimated, says a Business Standard report. And going by RIL’s own estimates, this is almost a tenth.

Niko, in its filing at the end of financial year 2011, had said, the block would have around 6.8 tcf of proven reserves. Quant had brought out a report early this month where it said 60 percent of the gas production in the KG-D6 block will become unviable given $7.9 billion of capital expenditure that was planned.

[caption id=“attachment_257037” align=“alignleft” width=“380” caption=“RIL and BP are jointly studying and preparing an integrated plan for capital development that they will submit by October. Reuters”]  [/caption]

The report further explains that Reliance is currently producing just 36 mmbscd per day. This roughly means the reserves will last just around eight years if the capex is not carried out to upgrade other probable and possible reserves .

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So why is the difference in estimates across various stakeholders in the basin? It could be that Niko and BP are using different methods to estimate the proven reserves. Quant says it could also be that BP sees almost 2.8 tcf of undeveloped reserves as unviable due to low future gas price that they assume.

Other research firms like Kotak and Standard Chartered have also been apprehensive of future performance of the company. Kotak says, “We are wary of continued decline in production from RIL’s KG D-6 block due to complex reservoir geology and long time required to drill new wells and to order and install sub-sea systems.”

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Standard Chartered is factoring in a 15 percent lower recoverable reserve versus the 10 tcf estimated as per the company’s last plan. RIL and BP are jointly studying and preparing an integrated plan for capital development that they will submit by October. Till then perhaps different numbers and different estimates will keep cropping up.