Mumbai, Feb. 19: BP Plc and Reliance Industries plan to invest more than $5 billion over the next three to five years to raise gas output from the troubled KG-D6 block.
BP Group’s chief executive Bob Dudley and Reliance Industries chairman Mukesh Ambani met Union petroleum minister Veerappa Moily in New Delhi today where they gave him an update on their investment plans.
“I encouraged them to invest more to help improve India’s energy security,” Moily told reporters after the confabulations.
In February 2011, BP agreed to pick up a 30 per cent participating interest in 23 oil and gas blocks operated by RIL for a sum of $7.2 billion.
Under the terms of the deal, BP will make future performance payments of up to $1.8 billion in the event of any exploration success resulting in the development of commercial discoveries.
The Centre has approved the stake sale to BP in 21 of the 23 blocks. However, the RIL-BP combine relinquished a few blocks subsequently. At present, the combine is developing 10 blocks.
The fresh impetus by BP Plc and RIL comes at a time output at the KG-D6 block has been falling over the past several months because of geological complexities coupled with the ingress of water and sand into the gas field.
According to the production status report submitted by the Directorate General of Hydrocarbons (DGH) in December, gas production had dropped to 23 million standard cubic meters per day (mmscmd), which is far less than the peak of 60 mmscmd hit three years ago.
At their meeting with Moily, Dudley and Ambani spoke about the KG-D6 block enhancement plan that is primarily designed to raise production.
In a statement issued today, RIL said under the KG-D6 block enhancement plan, both BP and RIL planned to invest in a series of projects to develop around 4 trillion cubic feet of discovered natural gas resources from the block.
At current international liquefied natural gas (LNG) prices, it would cost more than $50 billion to import this volume of gas into India. This plan, when implemented, would entail a potential total investment of $5 billion over the next three to five years, it added.
According to RIL, the enhancement plan will see the current production getting augmented beginning 2014.
Significantly, it will also include the drilling of a prospect field in the coming months. Sources close to RIL said the company believed that there was a possible hydrocarbon pool below the current producing field.
Sources said if the exploration yielded positive results, this could provide additional reserves and be brought into production utilising the existing infrastructure. The enhancement plan will also cover development of R-Series and satellite fields. The field development plan for the R-Series project has been submitted to the government for approval and this coupled with other projects is expected to add incremental production from 2017.
British Prime Minister David Cameron is on a three-day visit to India by leading the largest-ever trade delegation from the UK to any country.
“BP is the largest single British investor in India and the decision to join forces with RIL to invest $5 billion in the next few years into India’s gas markets reinforces how two of Britain and India’s leading companies can work together to invest in and supply the energy needs of the future,” Cameron said.