Reliance Industries, BP win India’s approval for gas discovery

Reliance Industries Ltd. (RIL) and partner BP Plc (BP/) have won approval from India’s government to prepare a plan for developing a natural gas discovery in the Bay of Bengal, two people with direct knowledge of the matter said.

A panel headed by the country’s oil and gas regulator recognized the R1 deposit as being commercially viable at a meeting held two weeks ago, the people said, asking not to be identified because the matter is confidential. The discovery is part of a cluster known as the R-Series that billionaire Mukesh Ambani’s Reliance and BP plan to jointly develop.

Reliance, which sold a 30 percent stake in 21 fields to BP for $7.2 billion last year, had sought the government’s permission to develop new discoveries to help counter a drop from its main areas in the KG-D6 block off the east coast. The R1 deposit is estimated to hold about 1.6 trillion cubic feet (45 billion cubic meters) of gas and may be capable of producing more than 10 million cubic meters a day after 2015, one of the people said.

S.K. Srivastava, the regulator, didn’t answer two calls to his mobile phone seeking comments. Tushar Pania, a spokesman for Reliance Industries, said he couldn’t immediately comment.

Gas output from the KG-D6 block is dropping after five of the 18 wells in the main D1 and D3 producing areas were shut because of water and sand entering them. Output may drop further over the next year as Reliance and BP study a plan to revive the wells, reducing supplies to power utilities and fertilizer plants.

Declining Gas Output

The Directorate General of Hydrocarbons, the regulator, is yet to approve the viability of three other smaller discoveries in the R-Series cluster, which lies within the KG-D6 block, the person said. Reserves at the R1 deposit are equivalent to about 14 percent of the primary D1 and D3 fields, which have about 11.2 trillion cubic feet of resources, the person said.

Gas output from three areas in the KG-D6 block, where production started in April 2009, has fallen to about 36 million cubic meters a day, the person said.

Reliance said Jan. 20 gas production had dropped to about 38 million cubic meters a day in the three months ended Dec. 31 from about 45 million cubic meters in the preceding quarter. A peak of 60 million cubic meters a day was reached in 2010 and output has slid since because of technical issues, according to the company.