Oil min overrules DGH, allows RIL to retain 3 prized KG-D6 gas fields

Oct 29 2013, 05:52 IST
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SummaryIn a relief to Reliance Industries (RIL) and BP, partners in the KG-D6 block, petroleum minister Veerappa Moily has virtually overruled the Directorate General of Hydrocarbons and allowed the combine to retain the three prized gas fields — D29, D30 and D31 - in the block which together hold around 2.2 trillion cubic feet (tcf) of gas.

In a relief to Reliance Industries (RIL) and BP, partners in the KG-D6 block, petroleum minister Veerappa Moily has virtually overruled the Directorate General of Hydrocarbons and allowed the combine to retain the three prized gas fields — D29, D30 and D31 - in the block which together hold around 2.2 trillion cubic feet (tcf) of gas.

The DGH had earlier asked RIL to relinquish these three fields for failing to perform the drill stem test (DST) — which the DGH says is mandatory — during the exploration stage.

In an order issued earlier this month, which is subject to review by the Cabinet Committee on Economic Affairs, Moily stressed that there were precedents in the past of the regulator not insisting on the DST for declaration of the commerciality (DoC). The minister also noted that the DoC was submitted by the firm within the stipulated time frame.

The oil minister, however, approved relinquishment of five other gas discoveries — D4, D7, D8, D16 and D23 together are estimated to hold 0.8tcf of gas — in the block owing to RIL’s failure to meet timelines of the field development plan (FDP).

“The five discoveries may be auctioned by the government. If a new bidder wins the fields they could use RIL’s existing infrastructure for which they can pay a rent,” said an oil ministry official.

The output estimates of the RIL's D1 and D3 blocks was originally estimated at 10.2 tcf before being lowered to 3.2 tcf. With around 2tcf already taken out, these two fields hold 1.2 tcf.

To address the oil companies' concerns over the practice of having to obtain regulatory consent for “commerciality” of their discoveries surrounding existing fields, the oil ministry had said that operators can start production from all wells in an existing development area without a DoC.

Sources said that Moily's note added that there has been a delay on the part of the DGH in reviewing the DoC and taking a categorical stand that the contractor must conduct DST. Moily's order stated that hence, a fair and balanced approach could be to allow the contractor to conduct the DST now and review the DoC on the basis of outcome of these tests.

The DGH had earlier maintained that RIL has not conducted the mandatory DST and was, therefore, liable to relinquish the three fields. RIL wants to develop these fields along with the neighbouring D-34 field

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