Monday, May 2, 2011

India asks Reliance to boost gas output with more wells

Gas production from a key block off the east coast operated by Reliance Industries has fallen further, the upstream regulator said on Monday, adding the company has been asked to drill 11 new wells by April 1, 2012, to boost output.

Reliance is pumping less gas than it should from the D6 block of Krishna-Godavari basin, the second biggest gas producer in India after Mumbai High. It was supposed to drill nine wells in this fiscal year.

Upstream Regulator SK Srivastava said Reliance has now been asked to drill two extra wells that it failed to drill in 2010/11.

Srivastva said Reliance was currently producing 48 Mmscmd gas from the D6 block, adding it would meet Reliance officials later this month to discuss the fall in gas output.

"In a week or two we will be meeting again and the operator has been asked to come up with the proposal to drill wells as per the plan," Srivastava told reporters after a meeting with Reliance executives.

On April 21, Srivastava said Reliance was producing 50 Mmscmd from the block.

"From the government's perspective gas production was the main issue. We deliberated with the operator about drilling more wells and bringing up the production," he said.

Reliance offered no comments, saying they were not aware of the details of Monday's meeting with the regulator.

The company, which has agreed a broad parternship with multinational BP on field development in a deal worth USD 7.2 billion, said in March it wanted to work to overcome "the technical challenge involved in these complex reservoirs."

Srivastava said last month Reliance had not given a satisfactory reason for the shortfall. Reliance has drilled 20 of the 22 wells it was supposed to in FY11.

The concerns over Reliance's gas production have for months dampened growth outlook for the Indian energy giant and kept its shares under pressure.

India may have to step up imports of costlier Liquefied Natural Gas (LNG) to meet the shortfall.

Meanwhile, Srivastava said to CNBC-TV18, "We have deliberated at length with the operator about drilling the wells and bringing up the production. in this meeting opeartor has said that he'll be coming up with the proposal for drilling the well shortly and we will be having another meeting in maybe a week or 2 weeks't ime with the operator."


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