RIL, BP offer $5 billion to hike KG D6 gas output

Reliance Industries Ltd. and BP PLC have told the Indian government they plan to invest $5 billion over 3-5 years to boost production from disappointing deepwater fields on the KG-D6 block off the country’s eastern coast.

RIL has been under pressure from the Indian Ministry of Petroleum and Natural Gas to drill more wells on the block, production from which has fallen below projections made in the production sharing contract. The operator blames the underperformance on reservoir complications.

Last year the government hit RIL with a $1 billion fine, in response to which the company sought arbitration (OGJ Online, Nov. 30, 2012).

The proposed projects, which require government approval, involve developing 4 tcf of discovered gas on the block. Importing that volume of gas would cost more than $50 billion, the companies said.

BP acquired its interest in the KG-D6 block in a $7.2 billion deal with RIL in 2011 covering 30% interests in production sharing contracts covering 23 blocks offshore India (OGJ Online, Feb. 21, 2011). RIL and BP also formed a 50-50 joint venture, India Gas Solutions Pvt. Ltd., to source and market gas in the country.

Until BP’s entry, Reliance held 90% interest in D6 and Niko Resources Ltd., Calgary, had 10%.

By the end of 2012, fields in the KG D6 block had produced 2 tcf of gas and 22 million bbl of oil.

BP Group Chief Executive Bob Dudley and RIL Chairman and Managing Director Mukesh Ambani reported their investment plan for the KG-D6 block to Veerappa Moily, the petroleum minister.

RIL and BP said implementing the plan will require deployment of advanced skills, processes, and technologies through the combined partnership to produce gas from more than 1,500 m of water. The gas will come from developing existing but unproduced discoveries and from further exploring the block (OGJ Online, Feb. 15, 2013).

A joint press release by BP and RIL said Moily agreed to expedite approvals related to the project.

According to the release, the production-enhancement effort will include:

● Compression and water-handling to boost production starting in 2014.

● Development of R-series and satellite fields, which with other projects will add production beginning in 2017.

● Drilling of a prospect to test a possible hydrocarbon accumulation below currently producing strata.

● Possible development of KG-D6 infrastructure as a hub for the east coast of India.

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