India’s largest private sector corporation Reliance Industries Ltd (RIL) and the Oil and Gas Regulator, the Directorate General of Hydrocarbon (DGH) seem to be on a collision course. DGH in a letter asked RIL to increase production from its oil and gas fields off the coast of Andhra Pradesh.
On its part RIL in a letter to the secretary to the Ministry of Petroleum complained that red-tapes on the decision-taking process had been hurting RIL plans of production and exploration from these blocks.
What is interesting to note is that though RIL wrote the letter some two months before the DGH report on under-production the letter came in the public domain only two weeks after DGH report was published in India’s leading English daily the Times of India.
Whether the leaking of DGH letter is the cause for resurfacing of an old RIL letter or not there are reasons to believe that RIL’s pipeline with the government machinery has turned somewhat rusty of late.
First take a look at the DGH observations after review of production and reservoir performance of D1, D3 fields and MA acreage of RIL. The gas production from 18 wells in D1 and D3 had been ranging from 44 to 45 MMSCMD as against the field development plan (FDP) estimated rate of 53.4 MMSCMD.
DGH expressed concern over the fact that RIL did not have any plan to increase output from the wells till 2013-14. Since the government had already made gas allocation on the basis on the FDP the shortfall would adversely impact the gas distribution for critical areas. Evidently the regulator is concerned.
More so RIL as contractor of the field was supposed to drill more wells in untapped parts of the reservoir. This part, according to DGH, contained 7.55 trillion cubic feet (TCF) of gas. The filed had gone on steam in April 2009.
During the next two years, that is by April 2011, RIL was expected to have at least 22 wells in operation against the 18 at the end of December 2010.The failure to reach the number of wells as per FDP did upset DGH. It felt that in view of the under-performance of the field RIL should have initiated drilling of more well so as to meet the FDP target. Clearly the regulator is concerned with the slippage in delivery of gas allocated by the government due to the under-performance.
There have been slippages in the MA field as well, according to DGH. RIL produces an average 18,200 barrels of oil per day against an FDP envisaged rate of 34,041 bopd. The reason for the missed target has been early water and gas ingress.
RIL, in order to exploit the maximum possible commercial value, has increased production of gas along with oil. But DGH is unhappy. The regulator is worried that this will harm the prospect of future oil production from the field. It, therefore, asked the company to firm up urgently the location of the remaining development well in MA field and fulfill the FDP commitment. While DGH expressed its reservation on the contractor RIL’s handling of the gas and oil fields, about three months back RIL told the government that its exploration and production schedules could be affected because decisions on "even routine" matters were being delayed by red tape in the oil ministry.
In a letter to the petroleum secretary S Sundareshan, written some two months before Murli Deora was shifted from the ministry, the company listed several issues pertaining to its acreages that have been hanging fire for months. A major complaint was that investments made into the Andhra offshore fields in 2010-11 were not reviewed for approval.
Investments are made into exploration or bringing acreages to production as part of pre-approved programmes with timeliness. But these have to be vetted by a panel with representatives from the company, the ministry and the DGH, the ministry arm that functions as a regulator.
In the absence of such clearance investments are not deemed valid or cannot be recovered from revenues from a producing field. Normally, the work programme for a year is approved at the beginning of the fiscal but it is yet to be done in case of RIL’s Andhra offshore field.
RIL’s objection is against DGH which is supposed to review as per the terms of the production sharing agreement but has effectively usurped the power to approve. But what is curious is that this objection of RIL raised more than two months ago surfaced in the public domain only after the “leak” of DGH review in media. Proxy war through media will not help RIL, DGH and more important the nation’s oil security.
On its part RIL in a letter to the secretary to the Ministry of Petroleum complained that red-tapes on the decision-taking process had been hurting RIL plans of production and exploration from these blocks.
What is interesting to note is that though RIL wrote the letter some two months before the DGH report on under-production the letter came in the public domain only two weeks after DGH report was published in India’s leading English daily the Times of India.
Whether the leaking of DGH letter is the cause for resurfacing of an old RIL letter or not there are reasons to believe that RIL’s pipeline with the government machinery has turned somewhat rusty of late.
First take a look at the DGH observations after review of production and reservoir performance of D1, D3 fields and MA acreage of RIL. The gas production from 18 wells in D1 and D3 had been ranging from 44 to 45 MMSCMD as against the field development plan (FDP) estimated rate of 53.4 MMSCMD.
DGH expressed concern over the fact that RIL did not have any plan to increase output from the wells till 2013-14. Since the government had already made gas allocation on the basis on the FDP the shortfall would adversely impact the gas distribution for critical areas. Evidently the regulator is concerned.
More so RIL as contractor of the field was supposed to drill more wells in untapped parts of the reservoir. This part, according to DGH, contained 7.55 trillion cubic feet (TCF) of gas. The filed had gone on steam in April 2009.
During the next two years, that is by April 2011, RIL was expected to have at least 22 wells in operation against the 18 at the end of December 2010.The failure to reach the number of wells as per FDP did upset DGH. It felt that in view of the under-performance of the field RIL should have initiated drilling of more well so as to meet the FDP target. Clearly the regulator is concerned with the slippage in delivery of gas allocated by the government due to the under-performance.
There have been slippages in the MA field as well, according to DGH. RIL produces an average 18,200 barrels of oil per day against an FDP envisaged rate of 34,041 bopd. The reason for the missed target has been early water and gas ingress.
RIL, in order to exploit the maximum possible commercial value, has increased production of gas along with oil. But DGH is unhappy. The regulator is worried that this will harm the prospect of future oil production from the field. It, therefore, asked the company to firm up urgently the location of the remaining development well in MA field and fulfill the FDP commitment. While DGH expressed its reservation on the contractor RIL’s handling of the gas and oil fields, about three months back RIL told the government that its exploration and production schedules could be affected because decisions on "even routine" matters were being delayed by red tape in the oil ministry.
In a letter to the petroleum secretary S Sundareshan, written some two months before Murli Deora was shifted from the ministry, the company listed several issues pertaining to its acreages that have been hanging fire for months. A major complaint was that investments made into the Andhra offshore fields in 2010-11 were not reviewed for approval.
Investments are made into exploration or bringing acreages to production as part of pre-approved programmes with timeliness. But these have to be vetted by a panel with representatives from the company, the ministry and the DGH, the ministry arm that functions as a regulator.
In the absence of such clearance investments are not deemed valid or cannot be recovered from revenues from a producing field. Normally, the work programme for a year is approved at the beginning of the fiscal but it is yet to be done in case of RIL’s Andhra offshore field.
RIL’s objection is against DGH which is supposed to review as per the terms of the production sharing agreement but has effectively usurped the power to approve. But what is curious is that this objection of RIL raised more than two months ago surfaced in the public domain only after the “leak” of DGH review in media. Proxy war through media will not help RIL, DGH and more important the nation’s oil security.
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