DGH disallows Reliance gas discovery on technical lapse

Reliance had last month struck gas in the fourth successive well on the block KG-DWN-2003/1 that lies close to its prolific D6 area in the Krishna-Godavari Basin in the Bay of Bengal.

The discovery in well number KG-V-D3-W1 was confirmed through a proper test and data collected was duly submitted to DGH for validation, but the company erred in not giving a 48-hour notice to the Directorate General of Hydrocarbons (DGH) before conducting the tests, sources said.

DGH on September 1 had written to Reliance saying "the operator (Reliance) has not provided any notice to DGH for witnessing the said discovery. This is violation of Article 10.2 of the Production Sharing Contract."

"In view of (this violation), the notified gas discovery (named Dhirubhai-52) in the block KG-DWN-2003/1 is not considered as gas discovery," DGH wrote.

As per PSC, DGH has the right to send a representative to witness the test conducted to confirm a discovery.

Industry observers expressed surprise at the DGH move to completely derecognise a discovery just because of a procedure lapse.

For a nation that relies heavily on imports to meet its oil and natural gas needs, any discovery is a welcome development and so the DGH move is surprising, they said.

"At best, DGH should have warned Reliance for the lapse or sought another test to determine the discovery but to disallow it completely doesn't augur well for an energy deficient nation," one of them said.

Reliance spokesperson could not be immediately reached for comments. The well, KGV-D3-W1, drilled in deep sea block KG-DWN- 2003/1, also known as D3, struck natural gas at 3,501 metres below the sea bed. This was the fourth successive gas discovery in the block, which lies in the same basin as Reliance's KG-D6 finds.

A gross gas pay zone of 37.5 metres was encountered, the company said in its discovery note to the DGH.

Reliance is the operator of the block with 90 per cent interest, while Hardy Oil of UK has the remaining 10 per cent in exploration block KG-DWN-2003/1, which was awarded to the consortium in the fifth round of bidding under the New Exploration Licensing Policy.

Reliance's KG-DWN-98/3 or KG-D6 block, was awarded under NELP-I in 2000, and is currently producing 60 million standard cubic meters per day.