DGH Wants Oil Ministry To Decide On RIL-BP Request

Upstream regulator DGH has asked the Oil Ministry to take a call on allowing RIL and its partner BP plc to invest in pre-development activities in 16 gas discoveries in KG-D6 block, most of which have not yet been proved to be commercially viable at current prices.
Reliance Industries (RIL) and BP Plc ofUKhad proposed to undertake concept validation and Front End Engineering Design (FEED) for all the 16 discoveries surrounding the currently producing Dhirubhai-1 and 3 gas fields in KG-DWN-98/3 or KG-D6 block.
The Directorate General of Hydrocarbons (DGH) feels any investment which can be recovered from gas sales revenues has to be restricted to fields which have either been proved commercially viable or whose field development plan has been approved, sources privy to the development said.
In all, 18 gas and one oil discovery has been made in the KG-D6 block. Of these two gas finds, D1 and D3, and one oil, D-26 or MA, have been put on production. Of the remaining 16 gas discoveries, commerciality of only five has been approved.
Commerciality is the first step to developing a discovery and essentially means the find holds enough reserves to be commercially produced at current rates.
Sources said DGH maintains that pre-development activities (FEED and concept validation) can be undertaken only for the four satellite gas discoveries — D-2, 6, 19 and 22 — whose Optimized Field Development Plan (OFDP) had been approved in January. Besides these four, commercility of one R-Series discovery has been approved and the survey can be extended to this.
With RIL-BP pressing for an early decision, DGH has written to the Oil Ministry asking it to take a call on approving the pre-development survey on all the 16 finds which may cost anything between USD 30 million to USD 50 million.
Sources said RIL-BP feel survey of all the discoveries together would not just save on time but also on cost and help in accelerated development of the untapped resources to reverse the falling gas production from KG-D6.
DGH feels any discovery whose commerciality or field development plan has not been approved, cannot be developed.
All investment made by RIL is first allowed to be recovered from revenues earned from gas or oil sales, and profits with the government split after that. If an operator is allowed to invest in not-so-commercial discoveries, the government’s profit take would be impacted, DGH feels.
Souces said a block oversight panel, called the Management Committee (MC) would meet to approve the pre- development surveys only after the Oil Ministry gives its nod.
RIL-BP have proposed that the expenditure they make in the survey would be adjusted in the integrated field development plan for all the discoveries they would be submitting to the authorities by October.