Moily approves taking away 5 gas discoveries from RIL

Oil Minister M Veerappa Moily has approved taking away five gas discoveries from Reliance Industries in the KG-D6 block over the company's failure to meet timelines but has allowed it to retain three other finds.

The five discoveries -- D4, D7, D8, D16 and D23 - hold 0.805 trillion cubic feet of reserves, or about one-fourth of the restated reserves in the currently producing Dhirubhai-1 and 3 (D1&D3) fields in KG-D6 block, and are worth $10 billion.

Moily in the October 9 order, however, agreed with RIL's contention that the company would retain D29, D30 and D31 gas finds to conduct tests for their confirmation, sources said.

RIL as per the contractual requirement of retaining only the area where discoveries have been made, had offered to give up or relinquish 5,367 square kilometres out of the total 7,645 sq km area in the eastern offshore KG-D6 block.

However, the Directorate General of Hydrocarbons wanted another 1,130 sq km of area, which contained these 8 finds, to also be taken away from RIL on the grounds that the timeline to develop the fields had expired.

RIL and its partner BP plc officials on September 18 made a detailed presentation to the Minister, Oil Secretary Vivek Rae and DGH Director General R N Choubey contending that it had not deviated an inch from the Production Sharing Contract and had the right to retain the 1,130 sq km area.

Sources said Moily after examining the issue wrote on the file that, ‘the contractor should be asked to relinquish corresponding areas pertaining to 5 discoveries (814 sq km) with immediate effect’ as RIL had not submitted the field development plan for these within the stipulated timeframe.

He wanted this area to be to be offered for bidding on a priority basis.

For the balance three finds covering an area of 316 sq km, he agreed with RIL-BP that the DGH had not been insisting on drill stem test for confirmation of a discovery in the past and had decided to rake up the issue of absence of DST in case of D29, D30 and D31 finds after 8 months of commerciality documents being submitted and around 40 months from the discovery.

"There has been pactice in the past not to insist for the DST for declaration of the commerciality (a prerequisite before investment plans are considered) by the DGH and a circular to that effect is still in existence," Moily wrote.

He noted that RIL had submitted declaration of commerciality for three finds within time and there was delay on part of the DGH in reviewing them.

"Therefore, a fair and balanced approach could be to allow the contractor to conduct DST now and review the DoC on the basis of outcome of these tests," Moily wrote.

Depending on the outcome, the matter may be taken up before the Cabinet Committee on Economic Affairs for its information, he added.

RIL has 18 oil and gas finds and one oil discovery in the eastern offshore KG-D6. Of these, D26 or MA oil discovery started pumping oil in September 2008 while D1&D3 gas fields were put on production in April 2009.

The government approved three separate field development plans for six discoveries (D2, D6, D19, D22, D42 and D34).

So, the total area of 1,446.12 sq km (corresponding to discoveries D1, D3, D26, D2, D6, D19, D22, D42, D34, D29, D30 and D31) is at present being considered as discovery and development area out of the contract area of 7,645 sq km, sources said.

The remaining 6,198.88 sq km is to be relinquished by RIL, they added.