Pegged to hold ‘oil-initially-in-place’ of 15.04 million barrels
Reliance Industries (RIL) and its foreign partner BP have reported eight oil discoveries in the Cambay basin block bagged by them in the fifth round of New Exploration Licensing Policy (Nelp) auction. The discoveries in block CB-ONN-2003/1 reportedly hold oil-initially-in-place (OIIP) of 15.04 million barrels, two officials in the know of developments told FE.
It was not immediately known if the management committee of the block, comprising representatives from the petroleum ministry, Directorate General of Hydrocarbons (DGH) and the explorers, have given go-ahead for the declaration of commerciality (DoC) of the discoveries.
It is important for RIL to bring on stream new oil and gas discoveries, as its exploration and production business contributes just 1.51% to its turnover (R6,068 crore out of R4.01 lakh crore in FY14). It is less than 10% to its sum-of-the-parts valuation of R941 per share, say analysts.
The block CB-ONN-2003/1, covering an area of 635-sq kilometre that is divided into two parts — Part A & B, is located nearly 130 km from Ahmedabad in Gujarat in the Cambay basin. RIL, as the operator, holds a 70% participating interest, while BP has remaining 30% stake. “The explorers have drilled 18 wells and a total eight discoveries were made during phase I, including the extension period,” said one of the officials.
The production sharing contract of the block was signed on September 23, 2005, and the total exploration period was spread from June 2006 till June 2013.
The contractor, according to article 10.5 of the PSC, has submitted the DoC of eight discoveries — D-43, 46, 47, 48, 49, 50, 51 and 45. It is proposed to drill six development wells in the block. The estimated cost of development is pegged around $25.57 million, while operating cost of each year is expected at about $4 million.
RIL did not respond to queries sent by FE, asking when is the commercial output expected from the block. BP spokesperson said, “RIL is the operator of the block and best positioned to respond to your specific queries.”
In a media statement issued on June 28, 2010, RIL had announced seventh oil discovery in the block CB–ONN–2003/1. The discoveries made in the block were witnessed by DGH representatives, said the second official. According to industry watchers, after DoC is given go-ahead, it may take another two-three years to put the discoveries into commercial production.
The Mukesh Ambani-promoted firm has faced investors’ glare after production from its flagship project KG-D6 has dropped drastically. The gas fields in deep waters of the east coast began production in April 2009 and touched a peak of 69.43 mmscmd in March 2010. Currently, the output is around 11-12 mmscmd.
Fortunes for UK-based BP’s investments in India’s oil and gas fields also did not match up market expectations. BP has written down the value of its investment in eastern offshore KG-D6 block by $830 million, following a lower-than-expected gas price hike. Recently, BP said, “Third quarter, fourth quarter and full year 2014 include write-offs of $375 million, $20 million and $395 million, respectively relating to the block KG-D6 in India.”