Reliance Industries admits efforts to increase KG-D6 output unsuccessful

Reliance Industries has said its efforts to step up gas production at the KG-D6 block haven’t met expectations thus far and a recent appraisal well drilled to assess hydrocarbon potential has turned out to be unsuccessful. RIL’s senior management told analysts who track the company at a meeting following the declaration of its September quarter results on October 13.

This reaffirms the serious challenges RIL faces in augmenting gas output from the reservoir touted to be India’s largest natural gas find. This is despite bringing on board London-based BP through a $7.2-billion deal in 2011, to benefit from its technical expertise in increasing gas supply from D6.

For the July-September period, gas production from KG-D6 averaged 12.5 million standard cubic meters per day (mscmd), down from 13.1 mscmd in April-June. Gas production from the reservoir was supposed to reach at least 60 mscmd by now, but RIL has cited technical challenges to explain the steadily declining gas production.

“RIL’s second appraisal well for its MJ-1 find (gas discovery in the KG-D6) has become unsuccessful,” said an Axis Capital report. “The company will carry out appraisal activities (with a third appraisal well) till May 2016, and final reserve numbers shall be available by mid-2016 (calendar year).” Given the elongated appraisal process, production from MJ-1 was unlikely before FY18, said the Axis Capital report.

A Credit Suisse report said: “RIL suggests initial interventions in D1/D3 (two big gas blocks within KG-D6) have not met expectations,” but it hoped that the installation of booster compressors by the first half of CY15 can help.

A Citigroup report said RIL was now planning to drill substitute and sidetrack wells to meet the challenge posed by the D1 and D3 blocks.

To complicate things further, RIL, for the first time, cited “natural decline” in the KG-D6 gas field as one of the reasons for declining gas production in its earnings press release, indicating that the gas field was showing signs of ageing.

Reliance Industries Limited (RIL)