RIL-BP gets nod to pump $1bn in KG

Panel Gives Conditional Approval For D6 Block, Gas Output Set To Rise

New Delhi: The oversight panel for India's showcase gas field off the Andhra coast gave Mukesh Ambani's Reliance Industries (RIL) and BP Plc permission to pump over $1 billion into the flagging field, but with the rider that three satellite gas finds would be declared viable only if they drill more wells at their own expense. 
    Sources said the panel, which is controlled by officials of the oil ministry and its technical arm, approved the field's annual operating and capital expenditure for three years, beginning April 1, 2010, with minor changes. 
    Oil minister S Jaipal Reddy had indicated the conditional approval before the panel's meeting ended. "Whatever the contractor needs technically, administratively to raise production, we will do. Approvals will be given subject to conditions," he told reporters. 
    RIL had in February, 2010, made the application for the three satellite discoveries to be declared viable. But the ministry's technical arm, Directorate General of Hydrocarbons (DGH) that heads the oversight panel, rejected the plea on the ground of shortcomings in the company's tests needed to confirm the finds. Now, RIL-BP would have to drill the wells for appraisal of sustainable production levels of the satellite finds. Then, data from new wells would be submitted to DGH. The sources said once the DGH approves the viability, the companies would approach the government for recovering costs from sale of gas. 
    Once the finds are declared commercial, RIL-BP would piece together an integrated development plan for the three finds together with 13 other discoveries, the sources said. The panel met after months of persuasion by RIL-BP combine on the ground that clearance for several pending investments was necessary to reverse the declining gas production from the KG-D6 field. 
    Production from the field has declined to 29 mcmd (million cubic metres per day) against 80 mcmd stipulated at this time that was stipulated in the plan approved for developing the field. Reddy said the fall in gas output from Reliance's field has caused acute shortage in power generation. He said Andhra Pradesh, his home state, has been hit the most as reduction in gas supplies to gas-based power plants have added to the drop in electricity generation at hydel power plants due to drought and thermal plants because of coal shortage. 
    The crisis has deepened as the government has decided to cut gas supplies to fuelstarved power plants across the country so that requirement of one power station at Dabhol in Maharashtra is met to the full. 
    The oil ministry had last week ordered RIL to use the dwindling KG-D6 gas field output to first meet full requirement of Dabhol power plant and supply any remaining output among the 24 other plants. That decision, Reddy said, was taken by an EGoM in 2008. "I will consult all other ministries to see what can be done," he added. 
VIABILITY TEST FIRST 
äRIL had in February 2010 asked DGH to declare three satellite discoveries viable 
äThe regulator, however, rejected the plea saying tests were needed to confirm the finds 
äNow, RIL-BP will drill well for appraisal of sustainable production levels 
äThe data will be submitted to DGC; if the regulator approves the viability, RILBP can approach the government for recovering costs from sale of gas