New Delhi: Upstream regulator DGH has asked the Oil Ministry to take a call on allowing RIL and its partner BP plc to invest in pre-development activities in 16 gas discoveries in KG-D6 block, most of which have not yet been proved to be commercially viable at current prices.
Reliance Industries (RIL) and BP Plc of UK had proposed to undertake concept validation and Front End Engineering Design (FEED) for all the 16 discoveries surrounding the currently producing Dhirubhai-1 and 3 gas fields in KG-DWN-98/3 or KG-D6 block.
The Directorate General of Hydrocarbons (DGH) feels any investment which can be recovered from gas sales revenues has to be restricted to fields which have either been proved commercially viable or whose field development plan has been approved, sources privy to the development said.
In all, 18 gas and one oil discovery has been made in the KG-D6 block. 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.
Commerciality is the first step to developing a discovery and essentially means the find holds enough reserves to be commercially produced at current rates.
Sources said DGH maintains that pre-development activities (FEED and concept validation) can be undertaken only for the four satellite gas discoveries -- D-2, 6, 19 and 22 -- whose Optimized Field Development Plan (OFDP) had been approved in January. Besides these four, commercility of one R-Series discovery has been approved and the survey can be extended to this.
With RIL-BP pressing for an early decision, DGH has written to the Oil Ministry asking it to take a call on approving the pre-development survey on all the 16 finds which may cost anything between USD 30 million to USD 50 million.
Sources said RIL-BP feel survey of all the discoveries together would not just save on time but also on cost and help in accelerated development of the untapped resources to reverse the falling gas production from KG-D6.
DGH feels any discovery whose commerciality or field development plan has not been approved, cannot be developed.
All investment made by RIL is first allowed to be recovered from revenues earned from gas or oil sales, and profits with the government split after that. If an operator is allowed to invest in not-so-commercial discoveries, the government's profit take would be impacted, DGH feels.
Souces said a block oversight panel, called the Management Committee (MC) would meet to approve the pre-development surveys only after the Oil Ministry gives its nod.
RIL-BP have proposed that the expenditure they make in the survey would be adjusted in the integrated field development plan for all the discoveries they would be submitting to the authorities by October.

The MC is chaired by DGH and includes oil ministry officials and representatives of RIL, BP and Niko Resources of Canada, the third partner in KG-D6.
RIL is the operator of the KG-D6 block with 60 percent interest and BP holds 30 percent stake. Niko has the remaining 10 percent.
Sources said RIL-BP are working on an integrated and capital efficient plan for block development, involving production from all the 18 gas discoveries in KG-D6.
They 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.
RIL began production from Dhirubhai-1 and 3 (D1&D3) fields, the largest among the 18 gas and one oil find, in April 2009 but output has fallen from a peak of 54 million cubic meters per day in March 2010 to 27.64 mmcmd this month.
Together with 6.45 mmcmd of gas production from D-26 or MA oil field in the same area, block output is 34.09 mmcmd.
The plan would help in cost savings of over USD 1 billion due to integration and optimisation. In addition, un-incurred phase-II cost of D1&D3 field development plan (USD 3.1 billion out of total cost of USD 8.8 billion) would not be required to be spent, they said.
Sources said RIL-BP plan to connect R-Series and four satellite fields, for which a USD 1.529 billion field development plan was approved by the government in January, to the existing infrastructure used to produce gas from D1&D3 and MA. Also, other satellite fields would be hooked up to these.
R-series and four satellite fields alone have potential to add 30 mmscmd of output.