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Reliance Industries may face further delay in KG-D3 exploration

Friday, 8 August 2014 - 7:30am IST | Place: Mumbai | Agency: dna

Faces defence curbs, deferment in extension of exploration licence

The exploration of Reliance Industries's D-3 block in Krishna Godavari basin may be delayed again due to defence restrictions and extension deferment for the block.

RIL is the operator with 60% interest, while BP owns 30% and Hardy Oil 10% in the block, where exploration was scheduled to start by this year-end.

The management committee of the KG-D3 block -- which includes the three partners in the block and the Directorate General of Hydrocarbons (DGH) – met recently to discuss budgets and issues related to pending activities in the block, Hardy Oil said in an interim management statement on Thursday.

"The operator (RIL) noted that execution of activities are dependent on greater clarity of DRDO restriction for undertaking petroleum operations and the timely approval of the block extension," the Hardy Oil statement said.

In June, Hardy Oil had said the recommencement of exploration at the block was expected to start by 2014-end, however it has avoided to give any timeline in the current statement. Due to lack of rig availability, RIL was unable to start exploration in 2013 and had to push drilling programme to 2014. Drilling in the block has been on hold for almost three years now.

The partners have applied for extension of the exploration phase of the block to the end of 2014, but haven't received any confirmation yet. However, the approval of the initial six-month extension was received in the first quarter of 2014.

Earlier, Ministry of Defence had notified the joint venture that a portion of the southwest area of the block has been identified as a Defence Research & Development Organisation (DRDO) impact zone. As a result, access to this portion of the block could be restricted from time to time. RIL is in discussion with DGH and DRDO to clarify any conditions that may be imposed on the aforementioned zone, and to agree a way forward.

"Exploration drilling is expected to recommence once DRDO restrictions are clarified and approval of block extension is received. The GoI's review of the D3 DOC (declaration of commerciality) proposal will likely continue through to the completion of exploration Phase I. Clarity regarding the gas pricing framework should facilitate the review of the DOC," Hardy Oil said.

In June, the central government decided to defer gas price hike till October and review gas price formula suggested by the Rangarajan Committee, which would have almost doubled gas price from $4.2 per mBtu.

Analysts said that RIL and its partners have repeatedly made it clear that till the gas price hike is announced they may not be able to under take any new investment in exploration activity.

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