Reliance Looks to BP to Unlock KG Gas Potential

Reliance Industries says it was confident of unlocking the full potential of its prolific east coast gas field and other blocks with the help of its partner BP.

The country's largest private explorer is fighting a decline in gas output at its D-6 Block in Krishna Godavri Basin. Reliance on Aug. 30 closed a deal with U.K.-based BP to sell a 30% stake in its 21 oil and gas exploration blocks in India.

Last month, India's junior oil minister R.P.N. Singh said that gas production from Reliance's KG-D6 block during the April-June quarter was 31% below plan. Reliance's average gas production during April-June from the block was 48.60 million standard cubic meters per day. Based on the approved field development plan, the output should have been 70.39 mmscmd, the minister said.

India's federal auditor Thursday said Reliance Industries had violated the KG D6 production-sharing contract with the government. The Comptroller and Auditor General said Reliance initially estimated its capital expenditure for the D-1 and D-3 gas discoveries in the block at $2.4 billion, but revised it to $8.8 billion. The company also started implementing the revised plans before the government approved them.

The company said it had engaged global consultants Ernst & Young, IPA Inc. and Daniel Johnston & Co., who didn't find any irregularity in its capex and management of the block.

Reliance said it commenced gas production from KG-D6 in six-and-a-half years from discovery, in comparison to the global average of nine to 10 years for similar deep-water production facilities.

Source: Wall Street Journal