RIL cuts capital investment in KG-D6 oil fields by over $ 3 bn

Reliance Industries has cut capital investment on the main oil and gas fields in the KG-D6 block by over USD 3 billion on back of an unexpected drop in reserves in an area that was once India's most prolific.

The company has filed revised field development plans for the Dhirubhai-1 and 3 (D1&D3) gas fields as well as D-26 MA oil and gas field - the only producing areas among a total of 19 oil and gas discoveries made in KG-DWN-98/3 or KG-D6 block.

Sources said the company has scaled down capex in D1&D3 fields to USD 5.928 billion from USD 8.836 billion two-phase spending it had proposed in 2006.

RIL has already spent USD 5.693 billion on D1&D3 fields, that began producing gas in April 2009, and plans to invest a further USD 235 million in raising gas compression capacity.

Sources said in the revised field development plan (FDP) for MA field, RIL has scaled down the investment by USD 276 million to USD 1.96 billion.

RIL had in 2006 proposed to invest USD 2.234 billion in developing the MA discovery which began producing oil in September 2008 and gas in April 2009.

A government-controlled panel, called the Management Committee, for approved the MA field's revised plans, wherein the operator (RIL) will drill one gas well and convert two oil wells into gas wells to raise output over the next 2-3 years.

RIL has so far drilled six wells on the MA oilfield. But it had to shut two out of them due to high water and sand ingress, leading to drop in output from over 8 million cubic metres per day three years ago to just over 5 mmcmd currently.

Sources said RIL in the revised FDP for D1&D3 submitted to the Directorate General of Hydrocarbons (DGH) has stated that the remaining reserves in the fields do not justify drilling of any more wells and the additional USD 235 million spending would be for raising gas compression capacity.

In the 2006, it had proposed to drill a total of 31 wells capable of producing 80 mmcmd of gas by 2012.

However, RIL has so far drilled only 22 wells on D1&D3.
Out of these only 18 have so far been put on production while the last four drilled in 2011 have not been connected to production system as they contain uneconomical reserves.

D1&D3 are producing over 21 mmcmd of gas, down from 53-54 mmcmd achieved in March 2010. The output fell as high water and sand ingress shut six out of the 18 wells.

RIL believes that the field has not behaved as predicted and so indiscriminate drilling would be a big drain on cost, they said adding the investment downgrade follows only 3.10 Trillion cubic feet (Tcf) of gas reserves remaining in D1&D3 instead of 10.03 Tcf estimated in the 2006 plan.
RIL believes gas reserves lie in the satellite finds around D1&D3 and wants to develop them quickly to produce up to 30 mmcmd of additional gas.