New Delhi: Reliance Industries may restart crude oil production from its predominantly gas-rich KG-D6 fields next month but is likely to shut the fields again by early April to hook up more oil wells to raise output.
The MA field in KG-D6 off the Andhra coast, began pumping oil in September 2008 and had produced 790,000 barrels of oil till 9 December when output ceased due to equipment failure.
“Production is expected to recommence in March after completion of necessary repairs and modification,” a source said. Gas from the block is also expected to start flowing from the first week of March.
Reliance was producing about 10,000 barrels of oil per day from two wells before the shutdown and it would add another well to raise the output in March.
The source said three more wells are likely to be brought into production when the field takes the planned shutdown in March-end or early April. “Output is expected to rise to 40,000 bpd before the end of April-June quarter.”
Reliance had sold the first cargo of over 430,000 barrels of oil to Hindustan Petroleum Corp Ltd’s Vizag refinery and the second cargo is slated to go to Chennai refinery (CPCL).
CPCL has contracted 450,000 barrels of oil from Reliance at a discount of $5.34 a barrel to the internationally traded price of Nigerian Bonny Light crude oil. The price is the same that was offered by HPCL.
The source said Reliance has almost 360,000 barrels of oil in its inventory and would deliver the second consignment to Chennai refinery before March-end.
Reliance had initially said that MA field would be out of operation for 3-4 weeks but the outage had to be extended as some design changes had to be made on the floating, production, storage and off-loading vessel (FPSO) to which oil is pumped from the wells.
After the shutdown, Reliance had offered to sell 300,000 to 320,000 barrels of oil to CPCL and informed the company that if it wanted the full contracted quantity it would have to wait till restart of the field.
CPCL opted to wait, the source said.
Crude oil from the MA-1 field is stored on a floating, production, storage and off-loading vessel (FPSO) at the well-head and once critical volumes are reached it is transferred to a ship for transportation to a refinery.
The source said output from the MA field before the shutdown was erratic with more than expected natural gas flowing out of well along with crude oil. Production from the field varied on daily basis, sometimes falling to as low as 8,000 barrels per day and then suddenly rising to 12,000 bpd.
On 9 December, a rupture in a short pipe spool connected to the flare header in the FPSO led to the emergency shutdown of the production system.
Reliance had in November sold the first consignment of 59,000 tons of oil from the field to Vizag refinery in Andhra Pradesh at $5.34 a barrel discount to Nigerian crude grade Bonny Light.
Oil and Natural Gas Corp, India’s largest crude oil producer, also benchmarks its prime Mumbai High crude at this grade.
Both Vizag and Chennai refineries have evinced interest in taking the entire peak output of 40,000 bpd (2 million tonnes a year) of sweet crude on a long-term basis. The peak output was envisaged in second calendar quarter of 2009 and in all likelihood, Reliance may split the volumes equally between the two, the source said.
Reliance is the operator with a 90% stake in the 7,645 square km D6 block, off the Andhra coast. Niko Resources of Canada holds the remaining 10% interest.
The company, which had budgeted $1.5 billion for developing the oil field, has till now spent $1.09 billion and would invest the remainder in drilling and tying in three additional wells.