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DGH wants RIL to give up 86% of KG-D6 area

Oil regulator DGH wants Reliance Industries to give up 86 per cent of its KG-D6 gas block area, including 8 gas discoveries worth at least $5 billion, saying that the firm has overshot the time allotted to it for developing the area.

Rejecting RIL's offer to relinquish 4,233 sq km of 'low prospectivity area' in the eastern offshore KG-DWN-98/3 or KG-D6 block, the Directorate General of Hydrocarbons (DGH) has stated that the company should contractually give up 6,601 sq km out of the total 7,645 sq km area in the block.

In a 6-page note excluding 3 annexures, DGH Director General R N Choubey on 15 April wrote to oil secretary Vivek Rae that of the 19 oil and gas discoveries claimed by RIL, three finds have not been established as commercially viable in absence of test data and the company has not submitted any investment plans for another five.

'Ministry of Petroleum & Natural Gas may intimate the contractor (RIL) about cessation of Petroleum Exploration License in respect of 6,601 sq km of contract area in the first instance in the block KG-DWN-98/3 under Article 3.11 of PSC,' he wrote.

He said the area proposed for cessation has at least 1.15 trillion cubic feet of known recoverable gas reserves valued at $4.83 billion at current prices.

Of the 19 finds, RIL began crude oil production from MA field in September 2008. It started gas output from MA field and Dhirubhai-1 & 3, the largest of the 18 gas discoveries in the block, in April 2009.

'Of the rest, Declaration of Commerciality (DoC), the first step towards monetisation, for D29, 30, 31 and 42 has not been approved by DGH 'because of lack of sustainable production test data which a Production Sharing Contract (PSC) requirement,' DGH wrote.

D-29, 30 & 31 finds, according to DGH estimates, may hold 345 billion cubic meters of recoverable reserves, valued at $1.45 billion. D-42, which holds 11.46 bcf recoverable gas reserves, lies within approved mining lease area of four satellite gas discoveries (D-2, 6, 19 and 22) and hence will have no bearing on relinquishment sought.

DGH said RIL has not submitted field development plan for 5 gas finds — D-4, 7, 8, 16 and 23, containining 805 bcf of recoverable reserves worth $3.381 billion, even after expiry of timelines for the same as prescribed in PSC.

Further, two discoveries — D-5 & 18, were found to be not commercially viable.

DGH proposed that RIL should be allowed to retain only an area of 1,044 sq km which will hold the currently producing D1&D3 gas and MA oil and gas field besides a cluster of four satellite fields (D-2, 6, 19 and 22) and another D-34 discovery.

RIL had in its 13 March proposal wanted to retain 3,412 sq km of area containing all the oil and gas finds made till date.
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