Will DGH act against Reliance for failing on gas output?

Will the Directorate General of Hydrocarbons (DGH) take action against Reliance Industries (RIL), the operator of the KG-D6 basin, for failing to adhere to the production plan of natural gas from the field?

The upstream regulator’s technical team will produce a report within a month’s time after which a decision will be taken.

“RIL has not been able to stick to its plan of producing gas from the field. Though it has cited technical reasons for the falling production, we will have to examine the validity of this because we award the blocks on the basis of technical competency of a company,” said a source.

RIL has so far drilled 18 production wells in the D1 and D3 fields in the Krishna Godavari Basin, which gives it a combined output of 42 mmscmd.

The company has drilled two more wells but has not been able to connect those with the production system.

“Due to decreasing production there would be pressure on sectors such as power and fertilisers to source gas from outside which would be costly,” added the official.

According to chemicals and fertilisers ministry, RIL has already reduced gas supply by 8-10% to the fertiliser sector due to reduced production.

As per the initial plans RIL was to produce 67 mmscmd of gas from the KG basin by the end of March. However, in a communique to DGH earlier this month, the company has projected that the gas output will fall to 38 mmscmd in 2012-13.

As per the production sharing contract, RIL has to produce from 50 wells, and 22 wells must start production by the end of March 2011.

The natural gas production from the D6 block had dropped by about 15% to about 45-46 mmscmd from 53-54 mscmd, in November last year.

The production of natural gas from the D-6 basin started in April 2009 and D1 and D3 are the largest among the 22 oil and gas discoveries that has been made in the block.