RIL fixes limit on gas supply contracts

Reliance Industries has told the government that it will not sign contracts to supply gas from its Krishna-Godavari D6 fields beyond 60 million units a day, as it may not be able to sustain higher production

Reliance Industries (RIL) has told the government that it will not sign contracts to supply gas from its Krishna-Godavari (KG) D6 fields beyond 60 million units a day, as it may not be able to sustain higher production, reports PTI.

The government has so far allocated about 64 million standard cubic metres per day (mmscmd) of output from the eastern offshore fields to consumers in the power, fertilizers, steel and refineries sectors.

Of this, RIL has so far signed or committed to sign agreements for supply of 57.8 mmscmd of gas and told the oil ministry at a review meeting last month that it can only sign contracts on a firm basis for another 2.2 mmscmd, an official said.

"RIL does not want to sign and then fail on deliver," he said. "The company has told the government to choose users for another 2.2 mmscmd from the likes of Essar Oil's Vadinar refinery, who were allocated KG-D6 gas."

Essar Oil was allocated 0.6 mmscmd of gas on a firm basis, but the company has not yet signed a Gas Sales and Purchase Agreement (GSPA) with RIL, as its Vadinar refinery in Gujarat was not ready to receive gas from the field till recently.

The official said RIL has told the oil ministry that it can presently sustain output of only 53-54 mmscmd from the Dhirubhai-1 and 3 fields in the KG-D6 block and 7-8 mmscmd from the MA field in the same area.

The company had in December last year tested facilities at KG-D6 for a peak production rate of 80 mmscmd, but it estimates this level of production can only be achieved by the end of this year or early next year.

Oil regulator Directorate General of Hydrocarbons (DGH) has endorsed RIL's view on limitation of production, saying the output was in line with the approved Field Development Plan (FDP).

According to the FDP, peak output of 80 mmscmd was envisaged in 2011 and is to last till 2016.

The official said customers with pending allocations are those who have not been in a position to take gas for a considerable period of time.

It has been suggested that since there can be no reservation of gas, as stipulated by the Empowered Group of Ministers (EGoM), which framed the Gas Utilisation Policy, such allocations should automatically be deemed to have lapsed after a reasonable period. The oil ministry has so far not taken any view on this, he said.

Of the current production, about 14 mmscmd is sold to fertilizer plants, 28 mmscmd to power plants and 10 mmscmd to petrochemical plants and refineries. The remaining 7 mmscmd of gas was consumed by other sectors such as sponge iron plants, LPG, city gas distribution and the East-West pipeline.

The official said RIL stated that sustained production at the current level of 60 mmscmd is required for a longer period to gather more data and estimate the true production potential of the field.

Its assessment has been validated by a technical team from oil regulator DGH, which in late May assessed the performance of the fields and the ultimate potential for a possible increase in production.

The DGH team observed that several reservoir complexities existed — such as the large numbers of sands, connectivity, interference, cross flow and permeability variations — making the interpretation of acquired data difficult, he said.

RIL has also prepared a new geological model based on the data collected so far. This is being studied to assess the performance of the field so far.

The company has so far drilled 18 production wells in the D-1 and D-3 fields, of which 17 are in production. The remaining wells will be put on production after a work-over job.

Most recently, RIL signed GSPAs for supply of 0.86 mmscmd to the Koyali refinery of Indian Oil Corporation (IOC) and 0.2 mmscmd to the Mumbai unit of Hindustan Petroleum Corporation Ltd (HPCL).

RIL is in the process of signing GSPAs with IOC for supply of 0.74 mmscmd to the Mathura refinery and with NTPC for 1.51 mmscmd.

In addition, 1 mmscmd gas is required for operation of the East-West pipeline, which transports KG-D6 gas from Kakinada, in Andhra Pradesh, to Baruch, in Gujarat.

"The total number of firm GSPAs for KG-D6 gas, as well as gas required for pipeline operations already adds up to a quantity of 57.8 mmscmd of gas," the official said. "Based on the production of KG-D6, RIL can commit only 60 mmscmd for sale on a firm basis. Thus, of the pending allocations, additional GSPAs for only another 2.2 mmscmd can be signed now.

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