Reliance drills two dry wells in KG-D6 block

Since last year, RIL has witnessed a drastic drop in reservoir pressure and water ingress in its gas producing wells, leading to a drop in output from 61 mmscmd to less than 44 mmscmd, instead of rising as planned to over 70 mmscmd

New Delhi; Reliance Industries (RIL) has drilled two new wells in its KG-D6 gas block, but both have turned out to be almost dry, with very little hydrocarbon presence, vindicating the company's stand that indiscriminate drilling will not help solve the problem of falling gas output, reports PTI.

"The wells were disappointing, showing presence of very little gas. It is simply not economical to produce gas from those wells," a source privy to the development said.

In July, RIL completed drilling of two wells to take the number of producer or development wells in the Dhirubhai 1 and 3 (D1 and D3) gas fields of the eastern offshore KG-D6 block to 20. It, however, decided not to make a further investment to connect them to production facilities and transport the gas by pipeline to its onshore plant.

"The two wells will not even yield 1 million standard cubic metres per day," the source said.

Since last year, RIL has witnessed a drastic drop in reservoir pressure and water ingress in its gas producing wells, leading to a drop in output from 61 million metric standard cubic metres per day (mmscmd) to less than 44 mmscmd, instead of rising as planned to over 70 mmscmd.

The company wants to carry out more geological and reservoir studies and induct better technology before drilling more wells, but the oil ministry, on the advice of its technical arm, the Directorate General of Hydrocarbons (DGH), has ordered RIL to drill 11 wells by March next year.

RIL's opposition to indiscriminate drilling has led to the oil ministry contemplating the disallowance of cost-recovery of a third of the $5.69 billion investment that the company has already incurred on field development.

Sources said RIL drilled one of the two wells over the main reservoir/channel of D1 and D3 and the other outside, but both gave disappointing results.

The D1 and D3 gas fields currently produce 37.1 mmscmd of gas and another 7.4 mmscmd comes from the MA oil field in the same block.

Of the 18 wells drilled, completed and connected to the production system in the KG-DWN-98/3 (or KG-D6) block, only 16 are currently producing, as RIL had to shutdown two because of high water ingress, they said.

Sources said the ministry and DGH are upset with RIL because the billionaire Mukesh Ambani-led firm has not adhered to its commitment to drill 22 wells by April, 2011, as laid out in the 2006 field development plan for D1 and D3.

They feel the main reason for the fall in output is this unmet drilling commitment, whereas RIL has been trying since early this year to explain that more wells will not lead to any significant increase in production.

Output, according to the company, will rise only when new pools or reservoirs of gas are brought into production. This can happen only when geology is studied afresh with deep-sea exploration specialist BP Plc, which has taken a 30 per cent stake in KG-D6.
RIL has so far spent $5.694 billion on the two fields and has recovered $5.258 billion from the sale of gas produced.

However, the oil ministry wants to limit cost recovery in the block in proportion to the slippage in output with reference to the stipulated timeline, reducing RIL's entitlement to $3.405 billion.

RIL, however, feels such a move would be illegal, as the Production Sharing Contract (PSC) does not have any such provision and the $1.85 billion already recovered by RIL cannot be reversed.

"If the PSC were indeed to be re-written to link cost recovery to levels of production, it would also have to include provisions for allowing the contractor (RIL) to recover costs in excess of his investment in case he were to achieve a rate of production higher than that estimated at the time of capex approval," RIL senior vice-president (commercial) B Ganguly wrote to the ministry on 16th September.

RIL said as per the PSC, all costs and production numbers provided in the field development plan (like the one approved for KG-D6 in 2006) are only estimates based on the understanding of the reservoir and the market prices at any given point of time and "such estimates cannot be construed as constituting a commitment under the PSC."

"There is no provision under the PSC that can limit cost-recovery to either production levels achieved by a contractor or to the extent that facilities are utilised under a development plan at any given point of time," RIL wrote.

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COMMENTS

Citizenindia

5 years ago

All bluff. All his good news coincides with insiders selling stock. Remember 2008 when they spoke of new gas finds and oil in the bottle . The nest investors heard was that they made a cool sum in the highs by selling treasury stock. Now hammer the stock down and add back stock to treasury or promoter front cos so that next round of trading can happen! He sold shares to LIC at cool prices. Will buy it back atleast 50% lower na. Uske liye aise news zaroori hai. Botttom line, cant rely on reliance.

RBI issues norms for setting up of IDFs by banks, NBFCs

An NBFC sponsoring IDF-Mutual Fund should have a minimum net owned funds (NOF) of Rs300 crore and capital adequacy ratio of 15% while sponsors of NBFC-IDFs will have to contribute a minimum equity of 30% and a maximum equity of 49% of the IDF-NBFC

Mumbai: The Reserve Bank of India (RBI) today announced guidelines for permitting banks and non banking financial companies (NBFCs) to set up Infrastructure Debt Funds (IDFs), to help meet long-term financing for the sector, reports PTI.

IDFs would be set up either as mutual funds (MFs) or NBFCs, RBI said in a statement.

Outlining the parameters for setting up IDF-MF, the central bank said an NBFC sponsoring IDF-Mutual Fund should have a minimum net owned funds (NOF) of Rs300 crore and capital adequacy ratio of 15%.

Besides, its net NPAs should be less than 3% of net advances and the NBFCs should have been in existence for at least five years and earning profits for the last three years, it said.

Banks and NBFCs would be eligible to sponsor (as defined by SEBI regulations for mutual funds) IDFs as mutual funds with prior approval of RBI, it said.

It also said that the Securities and Exchange Board of India (SEBI) has amended the (Mutual Funds) Regulations to provide regulatory framework for IDF-MFs.

Banks acting as sponsors to IDF-MFs would be subject to existing prudential limits including limits on investments in financial services companies and limits on capital market exposure, it said.

The finance minister, in his budget speech for 2011-12, had announced setting up of IDFs to accelerate and enhance the flow of long term debt in infrastructure projects for funding the government's ambitious programmes in the sector.

The government has said that the infrastructure sector requires an investment of $1 trillion during the 12th Five Year Plan beginning next fiscal. Of this, 50% of the funding is expected to come from the private sector.

As for the setting up of IDF-NBFC by banks and non-banking finance institutions, sponsors of NBFC-IDFs will have to contribute a minimum equity of 30% and a maximum equity of 49% of the IDF-NBFC.

Banks and NBFC-Infrastructure Finance Company (NBFC-IFCs) may sponsor IDFs as NBFCs with prior approval by RBI.

Post investment in the IDF, the sponsor must maintain minimum CRAR and NOF prescribed for IFCs.

The IDF should be assigned a minimum credit rating 'A' or equivalent of CRISIL, Fitch, CARE, ICRA or equivalent rating by any other accredited rating agencies, it said.

Tier II capital cannot exceed Tier I. Minimum capital adequacy ratio should be 15% of risk weighted assets, it added.

Detailed guidelines for setting up IDFs banks and NBFCs would be issued separately, it said.

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Neyveli Lignite pays Rs361 crore dividend to Coal Ministry

NLC had reported nearly flat growth in profit to Rs342.8 crore for the quarter ended 30th June from Rs342.1 crore in the corresponding period of 2009-10

State-owned Neyveli Lignite Corporation (NLC) has paid a dividend of Rs361.02 crore to the Ministry of Coal for the 2010-11 fiscal. The dividend cheque was presented to coal minister Sriprakash Jaiswal by NLC chairman and managing director AR Ansari, an official statement said.

In the last fiscal, the PSU had declared a 23% dividend, amounting to Rs448.47 crore, it said. "The shareholders of the company at the 55th Annual General Meeting held on 12th September have declared a dividend at the rate of 23% for the financial year 2010-11. The total dividend payout... amounts to Rs448.47 crore," the statement said.

NLC had reported nearly flat growth in profit to Rs342.8 crore for the quarter ended 30th June from Rs342.1 crore in the corresponding period of 2009-10.

The company has four opencast lignite mines with a capacity of about 30.60 million tonne per annum, while it can produce about 2,740MW of power from four power plants.

On Friday, NLC ended 1.8% down for Rs81.95 on the Bombay Stock Exchange, while the benchmark Sensex declined 1.22% to 16,162.06.

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