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Reliance and BP kick-start the Rs 40,000 crore investment plan for reviving gas production in KG Basin

The government oversight panel, headed by the Directorate General of Hydrocarbons (DGH), had approved the Rs 40,000 crore investment plan for developing three sets of discoveries in the KG D6 block in February.

twitter-logo Nevin John   New Delhi     Last Updated: April 19, 2018  | 23:50 IST
Reliance and BP kick-start the Rs 40,000 crore investment plan for reviving gas production in KG Basin

After eight years of inaction, the offshore hydrocarbon assets in Krishna Godavari (KG) Basin -- owned by Reliance Industries, BP Plc and Niko -- will see a flush of investments for reviving natural gas production. RIL and BP announced on Thursday that they sanctioned 'satellite cluster' projects to begin investments. The 'satellite cluster' is one of the three projects, others are R Series and MJ1, in the Block KG D6 integrated development. 'R-Series' deep-water gas fields was sanctioned in June 2017.

The government oversight panel, headed by the Directorate General of Hydrocarbons (DGH), had approved the Rs 40,000 crore investment plan for developing three sets of discoveries in the KG D6 block in February. RIL will invest about Rs 24,000 crore, while its partners BP and Niko Resources will contribute Rs 12,000 crore and Rs 4,000 crore, respectively. The production is expected to start from 2022, a company official said.

Mukesh Ambani, Chairman and Managing Director of RIL, said in a press statement: "This development supports the country's imminent need of increasing domestic gas supply and is a firm step towards making India a gas-based economy." Bob Dudley, BP Group Chief Executive said: "Reliance and BP are able to develop these discovered gas resources efficiently and economically."

RIL had put together multiple revival plans but failed to recover the gas trapped inside the difficult deep-water terrain in the Bay of Bengal. It roped in British giant BP Plc, which took 30 per cent stake in all of its hydrocarbon assets in a $7-billion deal in 2011, to arrest the production slide. Since formation of RIL-BP partnership in 2011, they have invested Rs 13,000 crore in deep-water exploration and production until now. In addition to the D55 gas discovery announced in 2013, they jointly worked to sustain production from the geologically complex reservoirs in D1, D3 and D26 fields on Block KGD6. However, they failed to increase the production from the old fields, which stands at 5 million standard cubic metres a day (mscmd) now vis-a-vis its peak of 60 mscmd in 2010.

The companies plan to produce 30-35 mscmd of gas from the new fields of KG D6, which consists of the R-Series, Satellites and MJ1. "For the development of R-Series, the companies have issued the tender and received bids from sub-contractors. We will be able to start work from next year, since the favourable weather for working is available only for four months in a year in the east coast, between January and April. For the development of satellite cluster, we will invite bids from sub-contractors to start the work," say the officials. RIL is also looking at the options to optimise the existing offshore infrastructure facilities in KG basin to reduce costs.

RIL and its partners had, in 2016, withdrawn some of its arbitrations against the government to be eligible for the gas price revisions. The Modi government was unwilling to heed RIL's demand for arbitration in revising gas price since 2014. The government then revised the price to $5.6 per million British thermal unit (mBtu) from $4.2 for gas producers in India, except for RIL. RIL officials expect that the withdrawal of arbitration will help the company to claim the revised price of gas from the new fields.

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