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DGH rejects commerciality of RIL gas finds

Last Updated: Monday, May 7, 2012 - 17:51

New Delhi: Upstream oil watchdog DGH has refused to recognise two significant natural gas discoveries that Reliance Industries had made in a Mahanadi basin block, because the company failed to conduct its prescribed test to ascertain the find.

The Directorate General of Hydrocarbons (DGH) in March this year told RIL that Dhirubhai 32 and 40 (D-32 & D-40) gas finds in the Mahanadi basin block NEC-25 (NEC-OSN-97/2) cannot be recognised as a discovery because RIL had not carried out drill stem tests (DSTs) on them, sources said.

RIL says the two finds, on which it had conducted other tests, may hold 663 billion cubic feet of gas reserves and can produce 170 million standard cubic feet per day from six wells.

It had proposed an investment of USD 1.17 billion in developing the finds and another USD 23.5 million annual operative expenditure in producing 476 billion cubic feet of gas over the life of the field.

Sources said RIL wrote to DGH seeking a re-look at the Declaration of Commerciality (DoC) of D-23 and D-40 finds but the upstream regulator turned that down saying without DST tests it cannot declare the two finds commercially viable.

DoC is a pre-requistie for developing a find, and unless the regulator and the government gives DoC, no operator can invest any money.

DGH told the company that two discoveries had already been reviewed and rejected by the block oversight committee, called the Management Committee (MC). The panel is headed by DGH and also includes representatives from the Oil Ministry.

RIL, the operator of NEC-25, had asked DGH to reconvene a meeting of the committee so that the two finds could be recognised. It had argued that the refusal to recognise the two discoveries was delaying the flowing of first gas from the block.

To expedite the development of the block, RIL said it was necessary that the DoCs were issued at the earliest.

Sources said RIL claimed that a DST was not a conclusive test for a discovery, for it provides information only on the initial well production rate around the wellbore and not on the sustained field production rate.

It claimed that based on the results of DSTs carried out in 25 wells in the area -- including the neighbouring Krishna Godavari basin -- it had integrated several sets of data to prove the discoveries.

The operator argued that there was no need for carrying out any further DSTs as the flow rates for the two discoveries could be derived from the existing data.

But DGH stood firm and said no fresh MC meeting would be convened, they added.


First Published: Monday, May 7, 2012 - 17:51
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