Reliance Industries operated KG-D6 wells may dry up by 2020

The Reliance Industries-operated KG-D6 gas block, once regarded as capable of transforming India’s energy sector, could cease to produce by 2020, sources privy to the situation say. The existing fields in the block are drying up faster than assumed earlier and the explorer may not spend on development of newer areas in the absence of ‘remunerative’ gas prices, they told FE.

Production from the block — officially called KG-DWN-98/3 — peaked in the last quarter of FY10, when it touched 60 million metric standard cubic metre per day (mmscmd), and has since plummeted to the current level of 9.5 mmscmd.

“Output from fields in the KG-D6 block including D1, D3 and D26 are dipping fast and at this rate the production could come to a zilch in the four years,” an official said. “The work programme and budget does not reflect any development of newer areas in KG-D6. It means that output is not going to rise and would fall every month,” another official said.

RIL did not respond to queries sent by FE.

In 2002, RIL struck gas in the D1-D3 fields of KG-D6 block and it has been producing gas from these fields since April 1, 2009. It has also been producing light crude oil from the D26 oil field in KG D6 block, since September 17, 2008. Both projects have been commissioned in a record time — the D1-D3 fields in about six and half years since the discovery, and the D26 field in just a little over two years since it was found.

“Fall in oil and gas production was mainly on account of natural decline in the fields,” RIL said on October 16. The price of domestic natural gas is currently decided based on a formula approved by the Modi government in October 2014, which is linked to select global indices. The rate fell to $3.82 per million British thermal units (mBtu) for the six month period till March 31, 2016 on gross calorific value (GCV) basis, against $4.66/mBtu in the previous six months.

BP and Canada’s Niko Resources are RIL’s partners in KG-D6 block.

RIL’s revenue from domestic exploration and production gas dropped 15.5% year-on-year to R1,166 crore during July-September quarter of FY16 against R1,380 crore in the same months previous year.

Lower oil and condensate prices and decline in gas production from KG-D6 block led to the 15.5% fall in revenues. Lower realisation for liquids and natural decline in production impacted segment EBIT (earnings before interest & tax), which was down 83.1% to R56 crore, RIL had said.