Govt takes away 5 RIL gas blocks
Oct 28 2013 , New Delhi
Firm allowed to retain three other blocks with $4b assets
Following a decision by oil minister Veerappa Moily earlier this month, the government last week notified the acquisition of these assets with reserves worth 805 billion cubic ft in an area of 814 sq km.
These oil and gas assets in D4, D7, D8, D16 and D23 blocks will now be auctioned, if the cabinet committee on economic affairs (CCEA) endorses Moily’s proposal. In that case, tenders may be floated early next month.
The government has allowed RIL to retain — as requested by the company — three assets worth $4 billion for further tests and exploration in D29, D30, D31 blocks of the basin. These three fields have gas resources of 345 billion cubic ft. The petroleum ministry order of October 23 was served also on RIL’s two partners, Niko Resources and BP Exploration (Alpha).
The directorate-general of hydrocarbons (DGH) had asked RIL to surrender all eight blocks or discoveries, where it had failed to honour the deadlines for development.
DGH had proposed that 85 per cent of the 7,645 sq km under RIL control be surrendered due to serious delays in development of wells in accordance with the field development plans submitted by the company.
But RIL in a presentation before the minister requested that it be allowed to retain 30 per cent of these assets (in D29, 30 & 31) and relinquish the balance 70 per cent. The minister in his order seems to have agreed to this request.
The minister has taken the position that he took a “fair and balanced approach” with regard to the eight blocks. In doing so, he also pointed to the delay on the part of DGH in approving the company’s plans.
RIL can now go ahead with drill stem test (DST) before it can declare the commercial mining of gas in the three blocks it has retained.
Officials of RIL and its partner British Petroleum had on September 18 made a detailed presentation to Moily, oil secretary Vivek Rae and the director general of hydrocarbons RN Choubey. The two partners had argued that they had not deviated an inch from the production-sharing contract (PSC) and had the right to retain 1,130 sq km.
The RIL spokesperson in Mumbai told Financial Chronicle that the company would contest the acquisition of some of the discoveries, since the government side had delayed approvals. The breach of the timeline was not RIL’s fault alone, the spokesperson said.
Deven Choksey, managing director of KR Choksey, said it was disappointing news, since there was an embargo on the pricing front which kept the explorer in two minds. Besides the company itself wanted to relinquish some of the discoveries, since it was not happy with the prospects.
Even if the government goes ahead with the auction of the assets acquired, RIL may not entirely lose out. RIL’s assessment is that since the gas discoveries are marginal in nature in the five blocks, their standalone development may not be viable. Segregating these blocks from the others will only delay the development of these blocks.
RIL had told the government that unless all the blocks were developed together, integration at a later date would be difficult. Officials at the ministry said that successful bidders for the five discoveries would have to anyway depend on RIL to share its offshore infrastructure.
“Setting up standalone infrastructure for producing gas and oil from these five discoveries may not be feasible,” said one of them. In effect, even though RIL has to give up the five discoveries, it would be able to realise some revenues by sharing its infrastructure with the successful bidders.
RIL has estimated a delay of six to eight years for a new company to begin gas production from these five discoveries.
(With inputs from
Vikas Srivastav in Mumbai)