Odisha Sun Times Business Bureau
Bhubaneswar/New Delhi, Jul 20:
Reliance Industries Ltd (RIL) is all set to give up two of the gas discoveries namely D-40 in NEC-25 block off the Odisha coast and D-31 in KG D6 block.
Reliance, however, has opted to conduct Drill Stem Test (DST), the confirmatory test that reveals whether there is gas in the block or not, in two of the three contentious gas finds in one of the two discoveries in question in NEC-25 block and the KG-D6 block.
As per sources, the budget for doing the DST within the government prescribed cost of $15 million each was approved at the block oversight panel, called Management Committee, which met last week. In April this year, the Cabinet Committee on Economic Affairs (CCEA) had approved a policy to allow operators to develop a dozen natural gas discoveries worth about Rs 1 lakh crore at current prices.
The new policy gives companies the option to either develop the finds at their own risk or conduct conformity tests prescribed by upstream regulator Director General of Hydrocarbons (DGH) before developing them and recoup the entire cost.
Sources said the policy approved by CCEA settled long pending issue with regard to 12 discoveries in five blocks that hold reserves of around 90 bcm of gas. While RIL is carrying out discoveries in six of these blocks, Oil & Natural Gas Corporation (ONGC) is carrying out the discovery in the rest six blocks.
The CCEA allowed companies to either relinquish the blocks or develop them after conducting DST with 50 per cent cost of DST imposed as penalty in the event of the company not conducting the test on time. The cost recovery for carrying out DST was capped at $15 million.
The companies were also allowed to develop the discoveries without conducting tests at their own cost. The expenditure incurred in developing these blocks are supposed to be recouped only if the fields are commercially viable.
RIL has so far made 19 gas and one oil discovery in the eastern offshore KG-D6 block. Of these, two gas discoveries started production in April, 2009 and the oil find in September, 2008.
Investment plans for five discoveries have been approved and a similar number of finds have been taken away from RIL for not submitting development plans in time. RIL had decided not to develop two finds because of small gas pool and the remaining one discovery is within the mining lease area of the producing gas fields.
Out of a total area of 7,645 square kilometres in KG-D6 block in Bay of Bengal, the government last year allowed RIL and its partners BP Plc of UK and Canada’s Niko Resources to retain only 1,4462.12 sq km area where regulator DGH-recognised discoveries have been made.