The Hindu Business Line : Reliance to double KG Basin gas output

Digging deeper
Had earlier proposed 40 MMSCMD at $2.47 b
First gas expected by second half of 2008-09
Addl investment to meet rig chartering rates rise

New Delhi , Nov 1

Reliance Industries Ltd (RIL) today announced that it would invest $5.2 billion (Rs 23,293 crore) to double the output from its productive D6 block in the Krishna Godavari (KG) basin to 80 million standard cubic meters per day (MMSCMD).

The company said that it has filed an amendment to the initial development plan for the deepwater block KG-D6 with the Director-General of Hydrocarbons (DGH) for approval.

Petroleum Ministry sources told Business Line that a technical team has been put in place by the DGH, which is assessing the development plan.

RIL had earlier proposed investment of $2.47 billion to produce 40 MMSCMD for 7.5 years from discoveries Dhirubhai 1 and 3 (in the D6 block) out of a total 34 wells.

As per estimates, the country's current gas production was 32.2 billion cubic m (BCM) in 2005-06.

ONGC's crude oil (26 mt) and natural gas production (little more than 23 BCM) account for 78 per cent of the country's production.

Despite the increase in production rate, the RIL project is on schedule for first gas by the second half of 2008-09, a company statement said.

"The project is the first deepwater gas development project in India and, on commissioning, would be among the largest and most complex deepwater gas production systems in the world. It will be completed in about six years from the first discovery, making it among the fastest deepwater gas developments in the world."

According to industry sources, the increase in the company's investment in the D6 block would be accounted for mainly due to an almost 250 per cent jump in rig chartering rates.

Subsequent to the approval of the initial approved development plan for Dhirubhai 1 and 3 gas fields, a lot of exploratory work has been done in the block to assess the overall hydrocarbon potential and the recoverable reserves in these fields, RIL said.

This includes acquisition of additional 3D seismic data, drilling of additional exploratory wells as a result of 13 discoveries and extensive coring of two development wells.

RIL has also obtained independent assessment of 2P reserves for the Dhirubhai 1 and 3 gas discoveries at 11.3 trillion cubic ft, almost double the earlier estimates.

"In view of the significantly higher hydrocarbon potential and large projected deficit of gas demand, RIL has sought approval for the following: increase in production rate from 40 MMSCMD to 80 MMSCMD and enhanced facilities for production, collection, evacuation and handling of gas, both onshore and offshore," the company statement said.

Of the total discoveries RIL has made from the 15 wells drilled in the deep-sea block KG-D6, only the first four - Dhirubhai 1, 2, 3 and 6 - have been declared commercial.

The discoveries declared commercial would be developed in the first phase.

The deepwater block was awarded to RIL and NIKO Resources Ltd of Calgary, Canada under the first round of New Exploration Licensing Policy round.

RIL, as operator of the block, holds 90 per cent of the participating interest, and NIKO the rest.

The board of directors will review the project and its financing plan on November 9.

It will examine various funding options including project financing debt, convertible bonds and other hybrid instruments to achieve the optimal financing for the project.