DGH wants RIL to give up 86% of KG-D6 area

 Oil regulator DGH wants Reliance Industries to give up 86 per cent of its KG-D6 gas block area, including 8 gas discoveries worth at least $5 billion, saying that the firm has overshot the time allotted to it for developing the area.

Rejecting RIL’s offer to relinquish 4,233 sq km of “low prospectivity area” in the eastern offshore KG-DWN-98/3 or KG-D6 block, the Directorate General of Hydrocarbons (DGH) has stated that the company should contractually give up 6,601 sq km out of the total 7,645 sq km total area in the block.

In a 6-page note excluding 3 annexures, DGH Director General R N Choubey on April 15 wrote to Oil Secretary Vivek Rae that of the 19 oil and gas discoveries claimed by RIL, three finds have not been established as commercially viable in absence of test data and the company has not submitted any investment plans for another five.

“Ministry of Petroleum & Natural Gas may intimate the contractor (RIL) about cessation of Petroleum Exploration License in respect of 6,601 sq km of contract area in the first instance in the block KG-DWN-98/3 under Article 3.11 of PSC,” he wrote.

He said the area proposed for cessation has at least 1.15 trillion cubic feet of known recoverable gas reserves valued at $4.83 billion at current prices. Of the 19 finds, RIL began crude oil production from MA field in September 2008. It started gas output from MA field and Dhirubhai-1 & 3, the largest of the 18 gas discoveries in the block, in April 2009.

D-29, 30 & 31 finds, according to DGH estimates, may hold 345 billion cubic meters of recoverable reserves, valued at $1.45 billion. D-42, which holds 11.46 bcf recoverable gas reserves, lies within approved mining lease area of four satellite gas discoveries (D-2, 6, 19 and 22) and hence will have no bearing on relinquishment sought.

DGH said RIL has not submitted field development plan for 5 gas finds - D-4, 7, 8, 16 and 23, containing 805 bcf of recoverable reserves worth $3.381 billion, even after expiry of timelines for the same as prescribed in PSC.