RIL to relinquish two gas discoveries off east coast

RIL and its partners -- BP plc of UK and Canada's Niko Resources -- will relinquish discoveries D-40 in NEC-25 block off the Odisha coast and D-31 in KG D6 block, sources privy to the development said.

New Delhi: Reliance Industries (RIL) has decided to relinquish two gas discoveries off the east coast and opted to carry out government prescribed confirmation tests to retain three other finds.

Accepting a government offer to conduct Drill Stem Test (DST) under limited cost to retain gas discoveries that otherwise would have been taken away for not meeting timelines, RIL has opted to do confirmatory test on two of the three contentious gas finds in the KG-D6 block and one of the two discoveries in question in NEC-25 block.

RIL and its partners -- BP plc of UK and Canada's Niko Resources -- will relinquish discoveries D-40 in NEC-25 block off the Odisha coast and D-31 in KG D6 block, sources privy to the development said.

The company will conduct DST on discoveries D-32 in NEC-25 block and D-29 and D-30 in KG D6 block.
Sources said the budget for doing the DST within the government prescribed cost of USD 15 million each was approved at block oversight panel, called Management Committee, meeting last week.

The Cabinet Committee on Economic Affairs (CCEA) had in April approved a policy to allow operators to develop a dozen contentious natural gas discoveries worth about Rs 1 lakh crore at current prices.

The new policy gives companies options to either develop the finds at their own risk or perform upstream regulator DGH-prescribed conformity tests before developing them and recoup the entire cost.

Sources said the policy approved by CCEA settled long pending issue with regards to 12 discoveries in five blocks pertaining to Oil and Natural Gas Corp (ONGC) (six discoveries) and RIL (six discoveries).
The 12 finds hold reserves of around 90 bcm of gas.

The CCEA allowed companies to either relinquish the blocks or develop the discoveries after conducting DST with 50 per cent cost of DST being disallowed as penalty for not conducting the test on time. The cost recovery for carrying out DST capped at USD 15 million.

Alternatively, the companies were allowed to develop the discoveries without conducting DST in a ring-fenced manner i.E. At their own cost. The expenditure incurred in developing these finds will be recouped only if the fields are commercially producible.

RIL had notified the Dhirubhai-29, 30 and 31 finds in 2007 and submitted a formal application for declaring them commercial in 2010, well within the timelines set in the Production Sharing Contract. But the Oil Ministry's technical arm DGH refused to recognise them in absence of prescribed confirmatory test.

Same was the case with its gas discoveries in North-East Coast block NEC-0SN-97/1 (NEC-25) which hold recoverable reserves of 1.032 trillion cubic feet.

For the very same reasons, DGH had not agreed for DoC of ONGC's D, E and UD-1 finds in KG-DWN-98/2 or KG-D5 block.

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