RIL cuts KG-D6 block natural gas reserves estimate by 7%

Reliance Industries has cut estimate of natural gas reserves of its eastern offshore KG-D6 block by a little less than 7 percent, leaving over 6 trillion cubic feet of reserves still left to be recovered.

Updated: May 08, 2012, 21:14 PM IST

New Delhi: Reliance Industries has cut estimate of natural gas reserves of its eastern offshore KG-D6 block by a little less than 7 percent, leaving over 6 trillion cubic feet of reserves still left to be recovered.

RIL in its annual report for 2011-12 stated that its deepsea Krishna Godavari basin block had 206.46 billion cubic meters of reserves. Of this, it transferred 56.621 bcm to BP Plc when the British firm bought 30 percent interest in KG-D6 and 20 other blocks for USD 7.2 billion.

Besides, it revised the proved reserves in the area downwards by 12.418 bcm because the reservior had not behaved the way it should have, leading to output droping more than 40 percent to about 34 million standard cubic meters per day over the past two years.

After the revision, transfer to BP and production during the year, RIL in the report said it closed the 2011-12 fiscal with 103.958 bcm of reserves against its 60 percent interest in the block.

This translates into 3.67 Tcf of balance proved reserves for the equivalent of RIL's share (6.11 Tcf for the 100 percent of area).

RIL Chairman and Managing Director Mukesh Ambani in the letter to company shareholders said: "Production from the KG-D6 block has been adversely impacted mainly due to unforeseen reservoir complexities and water ingress in the producing fields."

"Significant steps have been taken by the joint technical teams (of RIL and BP) in assessing options for overall reservoir management based on which, an integrated plan for work-overs and additional wells can be executed, subject to necessary regulatory and government approvals," he said.

Operationally, RIL completed three years of operations at KG-D6. Production from KG-D6 was 5.67 million barrels of crude oil and condensate, and 551.31 billion cubic feet (BCF) of natural gas.

KG-D6 gas catered to demand from 56 customers in sectors like fertiliser, LPG and power.

"An average daily gas production from KG-D6 block for the year was 42.65 mmscmd," the report said.

In Dhirubhai-1 and 3, the two of the 18 finds that have been put on production, 22 wells have been drilled till date, of which 18 wells were producing. Of these, 2 wells were drilled during this year.

"Extensive reservoir studies are underway for augmenting additional production with the integrated (or combined or joint) efforts of RIL and BP's technical teams," it said.

Based on the production data as compared to the original production geological model, validated by experts, it appears that the decline in pressure / production has been higher than originally predicted, volumes connected to existing wells is lower than envisaged and gas outside the main channel was in small uneconomic volumes and not participating in production.

RIL said Optimised Field Development Plan (OFDP) for the development of 4 satellite discoveries in KG-D6 was approved by the Government in January 2012.

"Engineering activities, which are yet to commence will determine the future course of action. There have been re-estimation of reserves in these discoveries and RIL has restated the reserves downwards based on such results," the annual report said.

In addition, RIL has declared the commerciality of discovery D-34 of KG-D6 and a revised plan of development for the field submitted to the DGH.

"Further an integrated development plan for (all the 18) gas discoveries in the KG-D6 block is being conceptualised to maximise capital efficiency and accelerate monetisation," it said.

Ambani said 2011-12 was "a challenging year with unprecedented economic uncertainty in Europe, geopolitical upheaval in the Middle East and a slowing down of economic growth across Asia."

"These events had a profound effect on demand and margin outlook for industrial products across the world. In many ways, we are still feeling the after-shocks of the financial meltdown of 2008 and 2009 with leading economies continuing to suffer from low growth and the resultant adverse impact on demand for most products and services.

"We have been successful in insulating and de-risking our portfolio of businesses by following a prudent operating discipline and further strengthening our rock solid foundation for investments in future growth engines," he said.