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Output of gas from Reliance Industries (RIL) Krishna-Godavari D6 block could stagnate at levels of 10 mmscmd (million metric standard cubic metres per day) for the next five years. We will continue to produce gas at a level of 10 mmscmd or slightly higher till 2018, after which output should see a rise since new fields will start producing, senior company officials told FE. RIL currently produces just over 11 mmscmd from the D1, D3 and MA fields the producing fields in the KG basin, lower than the output of 14 mmscmd at the end of September 2013.
The companys projections are somewhat more pessimistic than the Streets forecasts. Kotak institutional Equities has pencilled in a production level of 14 mmscmd for the current year after which it expects a drop, in the next two years, to 11mmscmd and 12mmscmd. Thereafter, the brokerage estimates a pick-up to 15 mmscmd in FY17 and 22 mmscmd in FY18.
While the discovery of the MJ1 well in May, 2013 should boost output, that could take time. These are new discoveries and will take at least five years to come into production. Before that, no substantial jump in production is expected and RIL will try to maintain the plateau through work-over activities, the RIL executive explained. The other producing field is MA, primarily crude oil bearing, but also producing marginal volumes of gas. Drilling in the D6 block resumed in March this year, after a four-year hiatus, following the governments decision to permit drilling in additional wells in already developed areas.
The RIL management had earlier indicated that steps were being taken that might help arrest in the fall in production at D1 and D3 by FY2015. However, in the absence of any major discovery coming on-stream in the next five years, production is expected to hover around the 10 mmscmd mark. D1 and D3, which got off the ground from Q1FY10, are the two most prolific fields in the D6 block. While they were expected to yield a 80 mmscmd by Q4FY12, production after hitting a high of 59 mmscmd in Q3FY10, has steadily slipped. The drop has been attributed to a misreading of the geographical set-up blocks. Since these are deep water blocks, several wells needed to be drilled so as to contain the pressure levels. However, the rapid ingress of water and sand into the wells hit production.
Morgan Stanley wrote in mid-October that