The tug-of-war between Reliance and DGH

The director general of hydrocarbons-DGH and the government nominee on the Reliance-operated east coast block, after the technical presentation felt that a quick decision can not be made in such a short space of time

The steep fall in gas production in KG-D6 has caused a lot of worry and heartburn to one and all when a technical presentation by the Reliance Industries Ltd (RIL) team suggested that the government could consider appointing a third party international consultant to review the matter.


The DGH (director general of hydrocarbons) and the government nominee on the Reliance-operated East coast block, after the technical presentation felt that a quick decision can not be made in such a short space of time.


It may be mentioned that the Reliance-BP-Niko group suggested names of four leading international Reservoir Consultants, such as: Ryder Scott (Houston/Calgary), DeGoyer & MacNaughton (Dallas), Gaffney, Cline & Associates (London/Calgary) and Netherland Sewell & Associates (Dallas).


The management committee that oversees the operation of the block has nominees of contractors, DGH as well as the ministry. After reviewing the presentation, they may take further action, such as appointing an international reservoir consultant to investigate the reason for the fall.


This will only prove whether the claims made by Reliance that the fall in output is due to a geographical surprise and not due to exaggerated estimates made earlier. This will take us back to March 2011, when DGH issued a report that Reliance gas production from KG would go upto 67 mmscmd by April 2011, ie a month later! According to the web site visited, "How can an autonomous and independent agency like DGH give such a misleading report?" In fact, as the records will show, production began to fall soon afterwards.


According to Reliance, because of the water ingress, there has been a pressure drop in wells leading to lower production. Consultants hired by DGH, names not known, it appears, had recommended that drilling more wells could increase the production. Such a move is easier said than done, because extensive studies and surveys have to be made before planning a drill at a new site. This would be a time consuming process. However, the fact remains, that there is no information available if Reliance, did in fact do anything if at all, to source new wells because of the falling production of gas.


It is interesting to note that DGH was established in 1993 under the administrative control of ministry of petroleum and natural gas, primarily responsible for implementation of New Exploration Licensing Policy (NELP); also to study new unexplored coal bed methane, gas hydrates, oil shale etc. Reservoir engineers from DGH are also involved in evaluation of initial testing; commerciality from reservoir point of view; mid-course correction of producing oil and gas fields; annual review of work progress of PSC's related to reservoir activities. Their responsibilities include appraisal and advice government on the adequacy of plans. It is simply a huge responsibility that DGH shoulders for development of hydrocarbons in the country.


As a matter of interest, it may be noted that in the KG basin itself, in 2002, Reliance discovered 14 tcf (trillion cubic feet) of gas; Gujarat State Petroleum found 20 tcf in 2005; in 2009 Reliance found 20 tcf of gas in D-3/09 and ONGC found 10 tcf in 2009. The work in these fields is reasonably satisfactory and one may expect some further discovery in the months ahead. The revision in gas price to $8.4 per mmbtu has been in debate as also the issue of non-supply of committed gas in the last couple of years, due to fall in production. All these have to be handled with care, just as the fixation of price in rupee terms and not in dollars, and even if this is done to draw a parallel to the international market situation, then the exchange rate needs to be fixed so as to avoid any dispute later.


In the event the government does not want to consider the recommended Reservoir consultants made by Reliance, for whatever reasons, there are so many others that are available. Web sites indicate names such as Belltree Group of UK, SiteLark of USA and Knowledge Reserve, Houston, Texas, USA. In fact, DGH may also have an approved list of Reservoir Consultants whose services could be utilized to resolve the Reliance issue.


But, as a matter of precaution, it may be wise to have the other reserves mentioned above, for the discoveries made by Reliance, Gujarat State Petroleum and ONGC, be also verified by seeking a second opinion.


Instead of dragging this issue further in appointing committees, a time frame needs to be set to complete the whole process. And, if the DGH do not have an in-house consultant of international reputation and track record, it is time they gone one in place, urgently.


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

Shankar Deb
1 decade ago
Instead of procrastinating, an expert should be appointed immediately to break the log jam between the Govt and RIL.

An early resolution will enable the parties to get on with their work of increasing hydrocarbon production, and reduction of the CAD instead of constantly being adversarial.
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