New Delhi: Reliance Industries and UK's BP Plc have proposed to a do a single confirmation test on three natural gas discoveries in KG-D6 block that have so far not recognised as commercial finds by the Oil Ministry.
The Directorate General of Hydrocarbons (DGH), the technical arm of the ministry, has since February 2010 not recognised the D-29, 30 and 31 as discoveries as RIL had not performed its prescribed tests to confirm the finds.
Sources said RIL-BP on October 8 proposed to a do a single Drill-Stem Test (DST) on the three finds to establish them as commercially viable finds.
DGH, however, wants three separate DSTs to be done on the three discoveries before approving their Declaration of commerciality (DoC). DoC is pre-requisite for any discovery to be development.
BP India head Sashi Mukundan last month wrote to the Oil Minister M Veerappa Moily saying the proposal to conduct a single DST in one of the three discoveries to physically substantiate flow as forecasted should be enough to establish commerciality of all the three finds.
The variation from the DGH proposal to have three DSTs, was suggested in order to minimise the project cost, he added.
He stated that internationally, the purpose of DoC is to notify the government that the contractor believes in the commerciality of a particular discovery and hence is willing to spend more money by progressing it to the next stage of development -- engineering and preparing the field development plan (FDP) and developing the economic justification for the capital spend.
It is being progressed with zero cost to the government as all costs till the FDP is approved is borne by the contractor as 'risk' capital, he wrote, adding the three discoveries have resources of around 350 billion cubic feet which has the potential to add 5-7 million standard cubic meters per day (mmscmd) to the KG-D6 production in four-five years.
The three finds are part of the cluster that is called the R-Series in the eastern offshore KG-D6 block. RIL believes D-29, 30 and 31 together with the largest discovery in cluster, D-34 hold gross in-place reserves of 2.207 trillion cubic feet and the four could together produce a peak output of up to 20 mmscmd.
A block oversight committee headed by DGH, however, disassociated D-29, 30 and 31 and approved only D-34 with 1.267 tcf of reserves. D-34 alone can produce 14.68 mmscmd of gas from 11 wells for eight years on an investment of USD 2.338 billion.
Sources said RIL-BP plan to integrate these into current field development plans to optimise development.
DGH has reasoned non-approval of DoC on the contractor (RIL) had not done a Drill?Stem Test (DST) to establish sustainable production levels.
The company was of the view that the finds can be declared commercial as extensive data including mud logs and Modular formation Dynamic Tester (MDT) data and corings have been collected.
Once the finds are declared commercial, RIL?BP would piece together an integrated development plan for the three finds together with 13 other discoveries, sources said.
RIL is the operator of KG-D6 block with 60 percent stake while BP has 30 percent interest. Niko Resources of Canada has the remaining 10 percent stake.
The company has so far made 18 gas discoveries in the KG-D6 block. Of these, D-1 and 3 -- the largest among the lot -- were brought into production from April, 2009.
The block oversight committee, called the Management Committee, has approved an investment of USD 1.529 billion for producing up to 10 mmscmd of gas from the Dhirubhai-2, 6, 19 and 22 (D-2, D-6, D-19 and D-22) fields.
RIL is the operator of KG-D6 block with 60 percent stake. BP has 30 percent and Niko Resources of Canada the remaining 10 percent. Output from the block has fallen to about 24 mmscmd after hitting a peak of 62-63 mmscmd in August 2010.