A panel headed by India’s Directorate General of Hydrocarbons (DGH) has approved about US$4 billion worth of investment plans by India’s largest private sector company, Reliance Industries Ltd., (RIL) with its partner British energy giant BP Plc to develop three natural gas discoveries in the KG-D6 Block in the Bay of Bengal.
The DGH, the nodal technical arm of the oil ministry, tweeted that the managing committee approved three field development plans in block KG-DWN-98/3, which will bring an envisaged capex investment of about $3.997 billion offshore India.
BP said the three field development plans approved relate to two clusters referred to as satellite fields and the MJ (D55) deep discovery.
According to BP, these projects are expected to start production in 2022 and will together have a peak output of about 20 million metric standard cubic meters per day (MMscm/d).
Market observers feel that with investment plans for the three projects the partners are focusing on reviving output at the KG-D6 Block.
In 2012 the Indian federal government approved a $1.529 billion investment plan to produce 10.36 MMscm/d of gas from four satellite fields in block KG-DWN-98/3 (KG-D6) by 2016-2017. But citing gas pricing issues (at the price of $2.89 per million Btu) and various difficulties in deepsea exploration activities, RIL and BP did not start investing.
Noting the difficulties of oil companies, the federal government then evolved a new pricing formula using rates prevalent in gas surplus nations like the U.S., Canada and Russia to determine rates in a net importing country.
As the federal government had allowed a higher rate of $6.3 per million Btu for yet-to-be developed gas finds in difficult areas like the deepsea, RIL and BP decided to take up their development.
RIL is the operator of block KG-DWN-98/3, or KG-D6, while BP holds 30% interest in the block and Niko Resources of Canada holds the remaining 10% interest in the block.
In 2011 BP bought a 30% interest in 21 exploration blocks in the Krishna Godavari (KG) Basin for $7.2 billion. Since then, RIL and BP have invested a total of $1.6 billion in deepwater E&P.
In India, prior to developing an oil or gas field, companies must prepare a field development plan and need acceptance by a management committee, which comprises representatives of the companies, oil ministry and DGH.
The companies can commence developing oil and gas fields, only after submitting their field development plans and getting acceptance from the management committee.
The MJ gas find, which is estimated to hold a minimum of 28 Bcm (0.988 Tcf) of contingent resource, is located about 2,000 m (6,562 ft) directly below the currently producing Dhirubhai-1 and Dhirubhai-3 (D1 and D3) fields in the KG-D6 Block. It is believed that the investment in the MJ-1 discovery would be slightly higher because an FPSO will be used to produce the gas from the field.
In June 2017 Reliance and BP announced plans to invest $6.14 billion to develop already discovered deepwater gas fields in the KG Basin’s block KG-D6.
At that time a BP spokesperson said in a statement that the proposed investment was to bring in between 30 MMcm and 35 MMcm (1 Bcf to 1.2 Bcf) of natural gas production per day and sustain it over the next seven to eight years.
The plan included development of the R-series project as well as the MJ and satellite fields. The field development plan for R-series has already been approved.
The KG-D6 Block is estimated to have total proven reserves at 75 Bcm (2.65 Tcf) of natural gas. However, production at this field has been on a decline, which Reliance Industries has maintained is due to natural aging of the block. Earlier last year, natural gas output from the KG-D6 fields fell 29% year-on-year to 691 MMcm (24.4 Bcf) in the third quarter.
In May 2013 RIL, BP and Niko Resources of Canada struck a 155-m (509-ft) thick gas condensate column in the exploration well KGD6-MJ1, which was later named D55, or the MJ-1 discovery.
RIL has so far made 19 gas discoveries in the KG-D6 Block. Of these, D-1 and D-3, which are the largest among the lot, were brought into production from April 2009.
During recent past, investments in India’s oil and gas sector have fallen due to lower oil and gas prices. Natural gas prices in India have been market linked since November 2014 and have continuously dropped since then.
Having a population of nearly 1.3 billion people, India consumes more than 142 MMcm/d (5 Bcf/d) of natural gas and aspires to double gas consumption by 2022. Currently, India imports about 36% of gas for its domestic needs.
Gas production from the integrated development is expected to help reduce India’s import dependence and amount to more than 10% of the country’s projected gas demand in 2022 or substituting $20 billion worth on LNG imports.
The oil and gas industry ranks among India’s eight core industries. India was the third largest consumer of oil in the world in 2015 after the U.S. and China.