BP pushes for early govt nod on KG-D6 field development

BP pushes for early govt nod on KG-D6 field development

New Delhi: Fresh after getting approval for investing $7.2 billion in Reliance Industries’ oil and gas properties, BP Plc on Wednesday pressed for an early government nod to develop satellite fields in the KG-D6 block and reverse sagging natural gas output from the prolific acreage.

Bob Dudley, the chief executive officer (CEO) of Europe’s second biggest oil company, arrived here Tuesday evening on a two-day visit during which he will meet the virtual who’s-who of the government - from Prime Minister Manmohan Singh to finance minister Pranab Mukherjee and oil minister S. Jaipal Reddy.

Before his Thursday visit to the KG-D6 fields, which has been at the centre of BP’s $7.2 billion investment to buy a 30% stake in 23 oil and gas properties held by the Mukesh Ambani-run firm, Dudley said the block holds the resources to get back to the planned 80 million metric standard cubic metres per day (mmscmd) of gas output.

“I think yes," he told NDTV in an interview when asked if there was enough gas in the block. Referring to D6 as the “Golden Block", he said, “D6 is a world class resource", but also a “complex reservoir" that needs high technology and risk taking. “BP’s great sub-surface exploration skill" can help Reliance get back the sagging output, he said.

There are more fields around the currently producing Dhirubhai-1 and 3 (D1 and D3) fields in block KG-DWN-98/3, or KG-D6, which need to be quickly brought to production. “What we need to do now is develop those satellite fields. We are hopeful that the government will approve development of satellites and that is how you can bring gas production back up," he said.

Reliance has submitted a plan to invest over $1.5 billion in developing four satellite fields around D1 and D3 to produce up to 10 mmscmd of gas by 2016.

D1 and D3 have seen output drop to 36.5 mmscmd from 54 mmscmd in March last year instead of rising to 61.88 mmscmd as planned for the current year. Together with 7.4 mmscmd from the MA oilfield in the same block, the total gas production from KG-D6 currently is 43.9 mmscmd.

Reliance has attributed the fall in output to a drop in reservoir pressure and water ingress, but upstream oil regulator Directorate General of Hydrocarbons (DGH) said the company has not drilled an adequate number of wells.

Dudley stressed that approval for the satellite field development should come so that the winter - when weather does not permit drilling in Bay of Bengal - can be used for engineering and actual site work can begin when the weather window opens up early next year.

“I believe it will take to 2014 to get these kind of structures developed and tied back into infrastructure. We can see the resources out there and I believe by 2014, we will be back up," he said.

Interestingly, 2014 is also when the price of gas from KG-D6 comes up for review. The government had fixed the KG-D6 gas price at $4.205 per million British thermal units during the first five years of production. The KG-D6 fields began production in April, 2009.

“D6 is a world-class resource. But as always when you get into oilfields and gas fields, you are trying to imagine down miles under the sea, (but often) it is not quite as you expect. You find some surprises. So the field has declined and our teams and Reliance teams are working on that," he said.

Dudley, however, said drilling more wells in the currently producing D1 and D3 fields are not the answer to the fall in production.

“People are advocating that we put more straws (wells) in it. But actually what is around (D1 and D3) are a few more (reservoirs). What we need to do now is develop those satellite fields and some R-series fields around it," he said. “We are just getting in and looking at the economics now. It is deepwater. It is lots of technology, it is high risk. I think they (satellite fields) should be economic. I am hopeful we will be able to find a way to make those economic," he said.

The priority for BP is to get KG-D6 production back to its envisaged levels. “But for us, the priority working with Reliance is to get gas production back up. It will take some time. So if we get these satellites going, we can restore this," he said.