Regulatory red tape choked KG-D6 output, says BP chief

Richa Mishra New Delhi | Updated on March 08, 2018 Published on January 22, 2014

SASHI K. MUKUNDANCountry Head-India, BP Group

‘Production would have doubled if it were not for delays in approvals’

UK oil major BP Plc has said delays in getting regulatory approvals prevented the operators from reversing the fall in the output of the KG-D6 block, off the Andhra Pradesh coast.

“Had it not been for the delays in getting approvals, the output would have doubled today to 20 mmscmd (million standard cubic metres a day),” said Sashi K. Mukundan, Region President and Country Head—India, BP Group Companies.

It was in 2013 that the contractors — Reliance Industries, BP Plc, and Niko Resources — got the pending budget of the D6 block for the last three fiscal years approved. The current output from the D6 block, comprising the D-1 and D-3 and MA fields, is 13 mmscmd.

BP and its partners were in the public glare after output from the largest gas producing fields in the country declined. The output started to fall after hitting a peak of 61 mmscmd in 2010.

RIL-BP-Niko and the Ministry of Petroleum and Natural Gas have given different reasons for the drop in output.

While the contractors maintain that the fall was due to technical reasons, the Directorate General of Hydrocarbons believes it was because not enough wells had been drilled.

Critics said the contractors were not increasing output only because of the suppressed price for domestically produced gas. The fact that the falling output was reversed soon after the Government notified the gas price has reinforced their belief that the low price was the main reason for the decline. Rubbishing this allegation, Mukundan said work to arrest the decline and start producing gas from the MA oilfields started as soon as approvals came through. “It had nothing to do with the timing of the gas pricing notification.”

Asked if he still felt D6 has the potential of being the country’s largest gas field, Mukundan said: “It still has the potential of being one of the big gas fields in the country.”

Huge costs

Questions have also been raised on the idle facility on the East Coast and the excessive costs incurred. The infrastructure built was for gas production of 80 mmscmd, whereas the output was much below the target, said Mukundan.

In hindsight, it was good that the facility was created given all the new discoveries in the block. Today, building the same facility, with a cost escalation of 235 per cent, would cost more than $8 billion. Such an onshore facility could also become a hub for production from neighbouring fields bringing large economies of scale for India.

Published on January 22, 2014
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