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RIL gas output falls further

New Delhi, Dec. 5: Gas production from Reliance Industries’ eastern offshore KG-D6 block has slipped further to about 12 million metric standard cubic metres per day.

“It (production) is about 12mmscmd,” B. Ganguly, chief operating officer of RIL’s exploration and production business, said at an energy conference here today.

The production comprises output from Dhirubhai-1 and 3 gas fields as well as MA oil and gas field, he said.

RIL has blamed geological complexities such as high water and sand ingress in wells and larger-than-anticipated drop in reservoir pressure for the fall in output from around 70mmscmd in March 2010.

The government, however, believes that the output fell because the company did not drill the number of wells it promised when its $8.8-billion investment plan for the D1 & D3 fields got approved in 2006.

It sees the non-drilling of wells as a default in contractual obligation and has slapped an aggregate penalty of $1.797 billion on the company.

On the fresh $792-billion penalty that the government has imposed for producing less than the targeted amount in 2012-13, Ganguly said the issue would be part of the arbitration RIL had initiated against the previous $1.005 billion fine imposed for shortfall in production in 2010-11 and 2011-12.

The company said it did not drill the committed quota of wells as gas reserves were a third of 10.03 trillion cubic feet (tcf) estimated in 2006.

It said the production-sharing contract did not provide for the levy of penalty for producing less than the estimated output.

ONGC burden

State-owned ONGC today said increasing subsidy burden was impacting its investments in oil and gas exploration.

“Our net price realisation (after paying fuel subsidy) is $43 per barrel against the international oil price of $100,” Dinesh K. Sarraf, chairman-elect of ONGC, said at the summit here.

ONGC’s cost of production is $40 per barrel without considering any return on investment.

“Easy oil is already produced. This is an era of difficult oil (which needs more investments to produce),” said Sarraf, who is currently the managing director of ONGC Videsh Ltd.

Most of the ONGC fields are old and ageing where “easy” oil and gas have been produced. Now, production has started to dip and investments are needed to produce oil from difficult zones in those fields.

 
 
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