RIL offers to give up 4,266 sq km of KG-D6 block: report

RIL wrote to the ministry this week offering to give away a 4,266 square kilometre block in the Krishna Godavari block, sources privy to the development said.

 

The offer was made just as the ministry was readying an order asking the firm to vacate some 5,970 sq km of area of its KG-D6 block.

 

Contractually, companies are required to relinquish 25 per cent of the area in an oil and gas block at the end of first phase of exploration that spans some three years.

 

At the end of second phase, 50 per cent of the area is to be given up and by the third phase only the area, where the company has made a discovery and is required for development and production of the same, is allowed to be retained. The second and third phases are of a duration of two years each.

 

RIL and its partner Niko Resources of Canada were awarded the KG-DWN-98/3 or KG-D6 block in 2000. The three-year Phase-I ended on June 7, 2003, while the two-year Phase-II deadline was on June 7, 2005. The third phase ended on June 7, 2007.

 

Sources said upstream regulator Directorate General of Hydrocarbons (DGH) had agreed in 2006 to RIL's proposal of declaring the entire 7,645 sq km as discovery area, thereby allowing the company to retain the full area.

 

The decision was approved by a committee headed by Additional Secretary in the Ministry and by the Oil Minister thereafter.

 

However, the move came in for a sharp criticism from the government regulator Comptroller and Auditor General (CAG) as at the end of the third phase, only 79 per cent of the block area was covered by 3D seismic survey and yet the entire area was declared a discovery area.

 

The CAG, in its performance audit in 2011, had asked that Ministry to review the determination of the entire contract area of KG-DWN-98/3 (KG-D6) as 'discovery area'.

 

In the aftermath of the CAG criticism, the DGH recommended to the ministry that RIL should be informed that an area of 5,970 sq km is treated as having been relinquished in the first instance.

 

Sources said the ministry had not yet served the relinquishment order on RIL.

 

RIL and Niko have so far made 18 gas and 1 oil discovery in the KG-D6 block. Of these, the largest gas finds, Dhirubhai-1 & 3, were brought into production in April 2009 and the oil discovery, MA began pumping in September 2008.

 

Development plan for most of the satellite finds has either been approved or is under consideration of the authorities. Three finds, however, have not yet been declared commercially viable.

 

The KG-D6 output has dipped from 69.43 million standard cubic meters per day achieved in March 2010 to under 17 mmscmd this week.