RIL to begin production from KG-D6 block in Q3 of 2008

RIL to begin production from KG-D6 block in Q3 of 2008

Reliance Industries will begin oil and gas production from its prolific eastern offshore D6 block in the third quarter of 2008 calendar year, the company's junior partner Niko Resources of Canada has said.

Reliance is investing $5.2 billion to bring to production Dhirubhai-1 and 3 gas fields - two of the 18 finds made in the KG-DWN-98/3 (D6) block in Krishna Godavari basin. Alongside, it is also developing the MA oil field in the same block. Both "oil and natural gas production is expected to commence in the third calendar quarter of 2008," Niko said in its regulatory filing.

Volumes will ramp up to a targeted rate of 2.8 billion cubic feet per day (80 million standard cubic meters per day) of gas within first year of production. Peak oil output is seen at 40,000 barrels per day (2 million tons per annum).

Yesterday, the government had said that Reliance will pump 25 mmscmd gas from D6 from September and 40 mmscmd from March 2009. "The wells and facilities are substantially complete," Niko, which holds 10 per cent in D6, said. Niko said R1 exploration well in KG-D6 block added 2.2 Trillion cubic feet of reserves, while proved natural gas reserves in Dhirubhai-1 and 3 fields have more than doubled to 9.2 Tcf. Proven plus probable gas reserves in the two fields has risen by 15 per cent to 13 Tcf.

For oil field development, Reliance and Niko are investing $1.5 billion while in the second phase of gas development, the two firms would invest another $3.6 billion. Niko said conceptual studies are underway for the development of eight of the natural gas discoveries in the prolific Block. These discoveries are adjacent to Dhirubhai 1 and 3 gas fields that are currently under development. It is intended that these satellite discoveries be tied back to the Dhirubhai 1 and 3 facilities. Numerous other prospects have been identified in deeper water areas of the block, where further upside potential will be evaluated.

Reliance is currently drilling MK-1 Cretaceous exploration well, which is 11 km from the MA oil development. Of the $5.2 billion Phase-I investment, Reliance and Niko had sunk-in 2.58 billion dollar by March 31, 2008. In September 2007, the government approved the pricing formula for the sale of natural gas to be produced from the D6 Block, which currently results in a gas price of USD 4.2 per million British thermal unit.

Niko said the wells, the floating production, storage and offloading vessel (FPSO) and other facilities for the MA oil field are substantially complete. The initial field development costs, excluding the FPSO, are estimated at USD 1.5 billion and USD 400 million had been spent until March 31, 2008. The expected oil production from the MA field in the D6 Block will be sold at international market prices. Reliance, which holds 90 per cent sake in the 7,645 sq km KG-D6 block, won the block in the government's first international bid round in 1999. "Development of the Dhirubhai 1 and 3 natural gas fields and the MA oil field is substantially complete and exploration is ongoing on this block," Niko added.


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