NEW DELHI: A regulatory panel has allowed Reliance Industries to carry out surveys on 12 satellite fields in the deep water D6 block in the east coast, subject to the condition that this expense would become eligible for recovery only if a subsequent field development plan is approved by the authorities.
The management committee overseeing the performance of the D6 block in the Krishna Godavari basin decided last Friday that RIL could make investments in geophysical and geo-technical surveys and other studies in the R series fields (D34) at its own cost. The RIL-BP-NIKO consortium has to bear the risk involved in making this investment.
Sources said RIL would be able to make savings in its expenditure if surveys are done in these 12 fields, along with the other four fields D2, D6, D19 and D22, where such surveys were approved in February.
Sources said cost of hiring vessels equipped to do survey beyond 2,000 metre in water would run into several millions of dollars and holding surveys individually in different fields would lead to cost escalation.
The management committee, however, did not consider the consortium’s proposal for grant of approval for similar studies in the satellite fields D29, D30 and D31 as it hasn’t reviewed them yet.
Reliance’s exploration and development cost in the D6 block has recently been a matter of dispute after natural gas production fell below target, prompting the government to pin blame on the company for drilling fewer than the approved number of wells. The consortium, however, has cited unpredictable geological changes for the fall in production. RIL started production from the D6 block in 2009, but production has declined from a peak of 54 million cubic meter a day (mmscmd) in March 2010 to about 35 mmcmd at present. RIL has built a capacity to process 80 mmscmd of gas and the government now wants to restrict cost recovery to the extent of capacity utilisation.
To preempt a likely government move to restrict RIL’s cost recovery from the D6 field in line with the capacity utilisation, RIL and partners last Wednesday moved the Supreme Court, seeking a direction to the government to appoint an arbitrator to resolve the dispute. Reduced cost recovery means a gain for the government as its share of profit petroleum would go up correspondingly.