Wednesday, May 04, 2011
Knight Ridder/Tribune Business News
Reliance Industries drew flak from the oil ministry and its regulatory arm for exploration activities, Directorate General of Hydrocarbons, for not doing enough to ramp up gas production to the level projected by the company from its Andhra offshore fields.
At a meeting to vet investments into the fields made in the nine months of 2010-11, the two sides differed on measures to increase production. The government side insisted Reliance drill two more wells and operationalize two others that it has drilled but not connected to the pumping grid.
Reliance countered by saying more wells would only drain the same reservoir and not solve the problem of falling pressure in the existing wells. The company has drilled 20 wells against 22 approved in the field's development plan. Two of the wells have not been put into operation.
Production from the fields has dropped to some 41 mcmd, forcing the government to curtail supplies to non-essential industries such as petrochemicals and refineries and ensure earmarked quantities of gas to priority sectors like power and fertilizer units.
Director general of hydrocarbons S K Srivastava said Reliance and its Canadian partner Niko Resources had in the FDP (field development plan) committed to drill 31 wells in D1 and D3 fields in the KG-D6 acreage by April 2012 to raise output to 80 mcmd (million cubic metres per day).
"We have suggested that they meet whatever commitment (they made) in the approved FDP," Srivastava said. "They will come back with a proposal (on drilling more wells)."
Another meeting will be held in 2-3 weeks, Srivastava said. Sources said that DGH at the meeting tried to push a proposal that Reliance be disallowed to recover part of its $9 billion investment proposed in the fields but it had to back off when it was pointed out that the contract with the government did not have such a provision.
Reliance had built production facilities to support 80 mcmd of production. So, DGH wanted cost-recovery of only two-third of the capital spent in building those facilities.
PSC allows operator to recover investment made in developing a field before sharing profits among the stakeholders, including the government. But any move to change cost recovery norm would be possible only through an amendment to the contract, which can be done only with the approval of Parliament.
Copyright (c) 2011, The Times of India. Distributed by McClatchy-Tribune Information Services.
Oil & Gas Post
Promote Your Page Too
No comments:
Post a Comment