RIL's proposal to develop satellite fields hits hurdle

Reliance Industries ’ over three billion dollars proposal to develop satellite fields to offset fall in gas output from KG-D6 block today hit a hurdle when upstream regulator DGH refused to recognise its new partner BP in absence of a signed contract.

Reliance had taken proposal to do pre-development work in the limited weather window available in the Bay of Bengal and approval for the R-Series gas fields to the meeting of the block oversight panel, called Management Committee (MC).

But BP, which had in July got Cabinet approval for buying 30 percent stake in 21 blocks of Reliance including KG-D6, was told right at the beginning of the meeting that it cannot be considered partner as an amendment to the Production Sharing Contract for the block is yet to be signed.

Sources said the PSC amendment signing is pending at oil ministry and DGH level.

Due to this technicality, the MC meeting, which was attended by DGH Director General S K Srivastava and senior oil ministry officials, did not sign on resolution declaring D-34 find, which has 1.64 Trillion cubic feet of gas reserves, as commercially viable for production.

According to the rules, the block partners have to first sign on so-called Declaration of Commerciality before other members of the MC sign on it.

Reliance believes D-34 can produce 14.68 million standard cubic meters per day, roughly half the current production from its main Dhirubhai-1 and 3 or D1&D3 gas fields.

Sources said without the DoC, the field development plan for the field cannot be prepared.

Reliance-BP had proposed to invest $73 million in doing pre-development work on the four other satellite fields for which a $1.52 billion development plan is already under consideration of the oil ministry, during winters when weather does not permit drilling in Bay of Bengal.

They had hoped that completing engineering work during the winter months could have helped them begin actual site work when the weather window opens up early next year.

But the DGH refused to approve the budget saying the PSC does not provide for any pre-development expenditure, sources said.

The four satellite fields, whose field development plan has been approved by the DGH and is pending go ahead with the ministry, can produce 10 mmscmd.

Srivastava described the three-hour long meeting as “fruitful” without elaborating.

D1&D3 fields are currently producing about 34.5 mmscmd of gas while MA oil field in the same block is contributing just over 7 mmcmd.

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