rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Blow to RIL: Panel refuses to take view on experts' appointment

Blow to RIL: Panel refuses to take view on experts' appointment

October 01, 2013 16:55 IST

Mukesh AmbaniIn a blow to Reliance Industries, an oversight panel headed by oil regulator DGH on Tuesday refused to take a view on appointing independent international experts to validate reasons for the fall in gas output at the firm's KG-D6 fields.

The Management Committee headed by Director General of Hydrocarbons R N Choubey refused to take a view on appointment of renowned reservoir consultants Ryder Scott, DeGolyer and MacNaughton, Gaffney, Cline & Associates or Netherland, Sewell & Associates to ascertain if RIL's claims of fall in reserves are actually true or the firm was hoarding gas by producing less, official sources said.

Even though Oil Secretary Vivek Rae said an independent expert was needed to decide on the issue, his senior officials -- Aramane Giridhar, Joint Secretary (Exploration); S C Khuntia, Additional Secretary & Financial Advisor and VLVSS Subba Rao, Advisor (Finance) -- attending the one-hour long MC meeting did not convey any decision, merely saying the record minutes will be sent to participants, sources said.

The DGH has blamed RIL's failure to drill committed wells for the gas output falling by 80 per cent to 10 million standard cubic metres per day from D1&D3 fields, instead of rising to the planned 80 mmscmd.

It wants $1.786 billion penalty to be levied for this even as Oil Ministry in a parallel move wants RIL to be denied the benefit of gas price revision upon expiry of current $4.2 per million British thermal unit rate in April 2014.

On the other hand, RIL and its partner BP plc of UK feel the reserves have dropped one-third to under 3 Trillion cubic feet due to previously unknown geological factors and the undrilled quota of 11 wells would not increase production.

While drilling of the remaining 11 wells would require over $1.65 billion investment, the same reserves can be produced by spending around $0.5 billion in repairs and compression of existing wells, they say.

The appointment of an independent international expert, which RIL-BP have been pressing for several months now, would establish who is right and who is wrong, sources said.

Rae at an industry function told reporters that his Ministry has sent a draft note to various ministries for their comments on denying RIL the benefit of new price from April.

"It is going to Cabinet for a final decision in a week to 10 days," he told reporters, adding that the shortfall in gas production was around 1.19 Tcf in the past three years.

"Whether it (shortfall in production) is deliberate or not deliberate, this has to be decided by technical expert. Once the technical expert decides it was not deliberate, the new gas price formula will apply.

“If they decide it was deliberate, the formula will not apply," he said.

He said the issue of appointment of technical expert will have to be decided by his Ministry and not the Cabinet.

The Management Committee was to decide on accepting revised field development plan that slashes recoverable reserves in Dhirubhai-1 and 3 fields to 2.9 trillion cubic feet from 10.03 Tcf estimated in the original plan of 2006.

Also, two-phase capex plan of $8.836 billion (proposed in 2006) has been reduced to $5.928 billion.

It was to decide if 80 per cent drop in production was due to geological reasons or due to non-drilling the committed quota of 31 wells as claimed by the DGH.

Sources said RIL-BP blamed the output fall to drop in pressure in wells, which requires intervention like well repairs, stopping water production, and compression to pull more gas out of the reservoir and stabilise production.

Today, half the drilled wells are operating as the others had to be shut-in from water and sand ingress from the lack of approvals to intervene.

Since 2010, approvals for budgets for such activities were held back on advice from CAG. Approvals were granted in April 2013 and these activities will now be completed in 2015, losing precious time and money.

In the meantime, production has declined to alarming levels, where the field is in serious threat of a shut-in.

If these approvals were given on time, then the current production could have been 50-75 per cent higher than the current levels and more importantly the threat of a field shut-in could have been avoided.

© Copyright 2014 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.