The government has disallowed $1 billion expense of Reliance Industries Ltd (RIL) on the flagging KG-D6 gas fields for not implementing the approved field development plan, Oil Minister M Veerappa Moily said today.

“The average gas production from KG-DWN-98/3 (KG-D6 block) during the current year was about 29.81 million standard cubic metres per day as against 86.73 mscmd approved in the field development plans for D1, D3 and MA fields in this block, which are currently on production,” he said.

The output has dropped after hitting a peak of about 62 mscmd in August, 2010.

Moily said the output has fallen because one-third of the wells on D1 & D3 gas filds as well as on MA oil and gas field have ceased to produce due to water loading/sand ingress in wellbores.

Also, the company has not drilled “the required number of gas producer wells in D1&D3 fields,” he said in a written reply to a question in Rajya Sabha here.

“Government has not accepted the contention of the contractor (RIL) and have ordered proportionate disallowance of cost of production facilities amounting to $1.005 billion for not fully implementing approved development plan,” he said.

RIL, thereafter, initiated arbitration proceedings. The company and the government have appointed arbitrators to decide on the issue.

Moily said D1 & D3, two of the 18 gas discoveries made till date in the KG-D6 block, was to produce 80 mscmd in the current fiscal. Against this, they averaged 23.94 mscmd in period up to October.

“As a result, as against the projected cumulative gas production of 0.605 Trillion cubic feet from D1&D3 fields from April 1, 2012 to October 31, 2012, the actual cumulative gas production was 0.181 Tcf for the same period,” he added.

RIL, he said, has stated that any additional wells in D1&D3 fields may not help improve either production rate or recovery considering the reservoir behaviour.

The company has so far drilled only 22 wells on D1&D3, of which only 18 have been put on production. It was to drill a total of 31 wells as per the approved field development plan.

(This article was published on November 27, 2012)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.