The Petroleum and Natural Gas Ministry has rejected the “integrated development plan” submitted by Reliance Industries Limited (RIL) and its partner British Petroleum (BP plc) for development and production of 16 gas discoveries and instead asked it to restrict pre-development expenses only to fields that have proved commercial viability.

The Managing Committee (MC), led by the Directorate-General of Hydrocarbons (DGH) chief, rejected the proposal for undertaking concept validation and front-end engineering design (FEED) for all the 16 discoveries around the present productive Dhirubhai-1 and 3 fields in the KG-D6 block. It said pre-development investments could only be done in fields which had either been proved to be commercially viable or whose field development plan had been accepted by the authorities, Petroleum Ministry sources said.

The MC approved RIL-BP making the investment in the four satellite fields whose $1.529 billion field development plan (FDP) was approved in January, and on D-34 or R-Series field whose commerciality had been approved in February. “The MC is of the view that any unfruitful investment will restrict government profit which is not acceptable,” officials said.

All investments in pre-development activities are deducted from revenue earned from gas sales before profits are split between the operator and the government. In all, 18 gas and one oil discovery have been made in the KG-D6 block in the Bay of Bengal. Of these, two gas finds, D1 and D3, and one oil D-26 or MA, have been put on production. Of the remaining 16 gas discoveries, ‘commerciality' of only five has been approved. The DGH maintained that FEED and concept validation could not be undertaken on D29, 30 and 31, whose commerciality was rejected a few weeks ago. RIL-BP were of the view that a comprehensive survey on the entire block would save cost and aid in drawing an integrated development plan for all the 18 finds by October. The integrated plan, they felt, would help in checking flagging out from the block, a view not shared by the oil regulator or other government nominees on the MC.

RIL began production from Dhirubhai-1 and 3 (D1&D3) fields in April 2009, but output has fallen from a peak of 54 million metric standard cubic metres a day (mmscmd) in March 2010 to 27.64 mmscmd this month. RIL-BP are understood to have projected first gas from R-Series, the third largest gas find in KG-D6 block, by 2015 and production from satellite fields by 2016, subject to timely regulatory approvals. R-series and four satellite fields alone have potential to add 30 mmscmd of output.

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