RIL rebuts DGH’s KG-D6 report, pins hopes on BP to fix problem

RIL rebuts DGH’s KG-D6 report, pins hopes on BP to fix problem

New Delhi: Reliance Industries (RIL) has countered a report that the energy regulator Directorate General of Hydrocarbons (DGH) used to target it for falling gas production from the KG-D6 fields, saying the study was done without visiting the fields and the company was not given an opportunity to present its views.

Reliance was “deeply concerned and surprised" by the reservoir behavior, and “its deviation from what was envisaged in the Field Development Plan (laid out in 2006)," Reliance senior vice-president (commercial) B. Ganguly said in a 30 April letter to the DGH.

“Our concern is also evident from the fact that we have moved to bring in a more experienced partner in the form of (UK’s) BP, who brings with it the best deep water experience globally," he wrote, adding that Reliance plans to discuss the reservoir performance with BP to find a solution to the problem.

The regulator had commissioned independent consultant P. Gopalkrishnan to give a report on the reasons for gas output from the Dhirubhai-1 and 3 fields in the KG-D6 block falling to 42 million cubic metres per day from 53-54 mmscmd in March 2010, instead of rising to the projected 61.88 mmscmd.

In his letter, Ganguly gave a point-by-point rebuttal of Gopalkrishnan’s finding that the “shortfall of gas production is due to non-drilling of the adequate number of wells".

“While the DGH-appointed consultant has reached certain conclusions on the performance of the D-1 and D-3 fields, we as operators were neither approached nor afforded an opportunity to discuss any of the field issues with the consultant," he wrote.

“The consultant had not even visited the field to apprise himself of the actual conditions and field performance," he said. “The conclusions are further contrary to the facts and information provided by us from time-to-time to the DGH."

The DGH is using this report to make Reliance carry out the impossible task of drilling two wells by next month and another nine by the fiscal-end. This despite the fact that each well takes up to six months to be completed and there was a very small weather window available for drilling in the Bay of Bengal.

The regulator is mulling over the action it can take against Reliance for failing to meet this commitment, sources said.

Ganguly stated that Reliance neither had access to the consultant nor was the full report prepared by Gopalkrishnan ever provided to the company.

“From the conclusions that have been conveyed to us, it seems that the consultant either has not been provided or has not considered all reservoir/production data or it would not have been difficult for him to appreciate some very obvious reservoir pressure trends in the field that contradict the conclusions reached by the consultant," he wrote.

Ganguly stated that Reliance, BP and its existing 10% partner Niko Resources of Canada will “discuss the reservoir performance in detail and come up with most optimal solutions."

“These solutions would include identification of well locations and interventions in the existing wells," he said.

The Dhirubhai-1 and 3 fields in the eastern offshore KG-D6 block are producing 41-42 million standard cubic metres per day of gas, as against to the planned output of 61.88 mmscmd, due to a fall in reservoir pressure and water ingress in wells.

At a meeting of the Management Committee (MC) of the KG-D6 block on 2 May, Reliance pleaded for putting in place a technical committee comprising global experts to advice on the best way forward on the issues facing the fields.

The DGH and oil ministry choose to ignore Reliance’s call and ‘advised’ Reliance to drill two wells and complete a similar number of wells drilled previously by the first quarter of 2011-12 fiscal (June-end).

Also, they wanted another nine wells to go onstream before the end of the fiscal in March 2012.

The DGH representative, according to the minutes of the meeting, remarked that any additional well will take three years from the date of approval for the well location by the MC and, therefore, the additional production from these wells is unlikely to commence before 2014.

Sources said Reliance suggested at the meeting that instead of additional wells, those wells showing an increasing trend in water production could be considered for work-over jobs.

The firm said it has already planned work-over jobs in six wells.

At the meeting, Niko rejected the DGH’s suggestion to drill wells outside the main reservoir channel as economically unjustified.

Reliance-Niko, the source said, explained that they have complied with field development plan (FDP) in all respects except for the drilling of a few wells.

They also provided the technical reasons related to the reservoir complexities, with reservoir behaviour being different from what was envisaged/considered at the time of the 2006 FDP, leading to delayed drilling of wells provided for in the FDP.

The DGH representative, according to the minutes, remarked that Reliance has drilled wells in the main channel area where 40% of the reserves are present and additional wells will have to be drilled in the remaining 60% of the outside channel area.

Reliance explained that all the existing 18 production wells are in the main channel area, as envisaged in the FDP.