OIL ministry has directed its technical arm directorate general of hydrocarbons (DGH) to get a fresh ‘third party validation’ of $1.529 billion that Reliance Industries (RIL) plans to spend to monetise four satellite gas discoveries on the fringes of Krishna Godavari (KG) D6 basin. Gas supply from these fields is expected to begin in four years.

On January 3, 2012, the management committee of the block had approved optimised field development plan (OFDP) of four satellite gas discoveries — D 2, 6, 19 and 22 in KG-DWN-98/3 block, popularly known as KG-D6. The contractor RIL has submitted $1.529 billion plan for development costs and production from these marginal fields.

The management committee has decided that cost recovery for development and production operations will be on the actual auditable expenditure ma­de by contractor — RIL and its partners — BP Exploration (Alpha) and Niko Resources. At the same time, marketing cost and transportation of natural gas produced from these small fields are not cost recoverable.

Earlier in November 2011, DGH invited bids from its empanelled agencies to conduct a third party survey of capital expenses for these four fields. DGH empanelled agencies include Russia’s Pangea, UK’s Fugro Robertson, Gaffney Cline &Associates, and RPS Energy. Gaffney Cline and Fugro Robertson have submitted bids for the mandate.

However, DGH did not accept any of these bids because Gaffney Cline has conflict of interest, as it carried out reserve estimation for the same block in 2005-06. On the other hand, Fugro Robertson did not submit earnest bid security.

“Now, oil ministry has directed DGH to re-tender and invite bids again (for validation of $1.529 billion capex) and prepare a larger panel of agencies that may be useful in future also,” said a government official privy to the development.

DGH has noted that a peak gas production of 10.30 mmscmd can be achieved from these four small fields for three years from eight wells. The total estimated recoverable gas in these fields is recorded at 617 bcf. RIL will use delivery facilities at Gadimoga near Kakinada in Andhra Pradesh for ferrying this gas into pipeline grid.