Reliance Industries (RIL) and its foreign partners BP and Niko Resources would give away one gas discovery — D31 — and do the drill stem tests (DST) to confirm the extent of hydrocarbon presence in two other discoveries — D29 and D30 — in the once-prolific KG-D6 block. The move comes in the wake of the Cabinet Committee on Economic Affairs decision on April 29 that gave the explorers, including RIL and ONGC, that did not do the DSTs for some discoveries three options: Do DSTs and validate the discoveries, relinquish them or ring-fence them, which means go ahead without DST but at own risk.

In February 2010, RIL submitted declarations of commerciality (DoCs) for gas discoveries D29, D30 and D31 in the KG-DWN-98/3 block, commonly known as KG-D6. But in October 2010, the Directorate General of Hydrocarbons said the DoCs could not be evaluated because of lack of sustainable production test data which, as per DGH, is needed under the production-sharing contract (PSC). The three discoveries reportedly have a reserve of 345 billion cubic feet, which was valued at about $1.45 billion at the then-prevailing domestic gas price of $4.20 per million British thermal units.

“The explorer (RIL) has told the petroleum ministry it would conduct the DST in D29 and D30, while it’ll relinquish D31. It would also inform the government about other discoveries in separate blocks by June 26,” an official privy to the development told FE.

The DGH has maintained that DST is a mandatory contractual and technical requirement under the PSC since 2010. According to the regulator, in case a DoC is accepted without robust and technically sound data, it may lead to a field development plan (FDP) having higher probability of failure, which may lead to severe under-performance.

After two explorers — ONGC and RIL — ended up fighting with oil regulator DGH over conducting DSTs at their hydrocarbon finds in the Krishna-Godavari Basin, the government recently settled the issue by by means of reforming the policy and allowing the three options.

But conducting the DST has a caveat — only 50% of cost incurred would be allowed to be recovered and the maximum cost-recovery for carrying out a DST would be capped at $15 million.

For Updates Check Company News; follow us on Facebook and Twitter