BP has work cut out restoring D6 production

Vol 15, PW 2 (28 Jul 11) People & Policy

No doubt it is worth celebrating the government’s uncharacteristically swift approval of BP’s proposal to ‘farm-in’ 30% at 21 Reliance exploration blocks.

At $7.2bn, it’s the single-largest Foreign Direct Investment into India’s domestic oil sector. But even with BP’s vast technical expertise it will be no easy task to reverse declining gas production at the D6 gasfield.

“Government approval of BP’s ‘farm-in’ only formalises the (technical advisory) role BP has had at D6 ever since the deal was announced in February,” says an industry analyst. “I expect it will take BP and Reliance at least two years to get D6 gas production back up to 60m cm/d.

” As widely reported, D6 gas production stands at 48m cm/d against 60m cm/d contracted to customers. For this to change, Reliance must first resolve a damaging row with the DGH over D6 development drilling.

DGH and oil ministry officials want Reliance to drill 13 additional development wells by March 2012. But Reliance insists it has locations for only three.

“Each of these wells could be drilled in 45 days,” adds a Reliance watcher. “But it can take at least two years to organise ‘subsea’ construction to ‘hook-up’ the wells.

It takes that long to deliver ‘long-lead’ equipment.” Under the ‘farm-in’ Reliance will in theory control all commercial matters, including equipment orders.

But a major like BP won’t be happy with a relatively minor role as technical adviser. “BP has paid Reliance a $2bn advance,” we hear, “and will insist on vetting all drilling and development plans; I’m sure this is happening already.

” BP still awaits oil ministry approval for plans to pick up 30% at two more Reliance blocks: Assam block AS-ONN-2000/1 and Mahanadi block NEC-DWN-2002/1.

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