Reliance Industries & BP drill to ramp up gas output from KG-D6 Basin

Reliance Industries Limited (RIL) has been extracting gas from wells in the KG basin off India’s Eastern Coast for some time now. However, the company has faced some problems in the area. Hence, the Mukesh Ambani owned Oil & Gas giant is planning to extend the life span of the operational gas fields in the basin. British Petroleum (BP) will be working with RIL on the same. BP and RIL have signaled intent on working together for some time now. “Following approval by the relevant authorities in 2012, a number of activities are being progressed to arrest the decline in production rates and to extend the life of the KG-D6 producing fields. These include new work-over wells and the installation of additional compression and water handling capacity,” BP said in its 2013 annual report.

BP bought a 30% stake in RIL’s 21 Oil & Gas blocks in 2011 for US$ 7.026 Billion. These included the KG-D6 blocks. BP is working with RIL arrest the output decline in the KG Basin. RIL operates wells in the KG-D6 block; its total share here is 60% and Niko Resources of Canada hold 10%. BP, as mentioned previously, holds 30% stake in the basin.

Production at the KG-D6 Basin started in April 2009. Peak output of 69.43 million metric standard cubic metres per day (mmscmd) was achieved in March 2010. This would be short-lived though as water and sand seepage resulted in more than a third of the wells shutting down. Around four years later, as of March 2014, RIL is producing 13 mmscmd from the KG Basin, a sharp decline from over 60 mmscmd in the last two quarters of 2010.

BP and RIL have categorically stated that the primary reasons for the fall in output are geological factors and beyond their control. However, the oil regulators are of the opinion that RIL has failed to drill enough wells. Falling output had prompted the government to disallow proportionate cost recovery to Reliance, leading to arbitration proceedings. According to RIL’s calculations, production from the wells at KG-D6 would go down to 6.26 mmscmd by2020-21 and the wells would run dry by the following year, i.e., 2021-22. The contract period for this block ends in 2029. As a result, BP and RIL are working on extending the life span of the wells. D1 & D3, the largest of the 18 gas discoveries in the block, produced 66.35 mmscmd at its peak, while 3.07 mmscmd came from the MA field, the only oil discovery in the block. Output dropped to about 11.7 mmscmd last year.

To reverse the decline in output, remedial measures are in place and BP and RIL are working out a system by which they could arrest this decline in production. Talking about this episode, BP in a statement said, “In 2013, we made two significant gas and condensate discoveries in the Krishna-Godavari and Cauvery basins (blocks KG-D6 and CYD5), a key milestone for our partnership with Reliance. In August, the government approved the field development plan for the R-Series project in the KG-D6 block and has reviewed the appraisal plan for the KG-D6 discovery.” Also, BP has said that the resources present in the KG Basin have the potential to meet India’s growing demand for energy by increasing gas supplies from 2018. RIL and BP have surrendered most of the 21 blocks they partnered in 2011 as they did not hold commercially viable oil and gas. They currently hold only six blocks.

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