MUMBAI (Dow Jones Newswires), Oct. 17, 2011
Reliance Industries has suspended drilling at all the 21 oil and gas exploration blocks covered under a deal with BP for two-three months starting early October, a person with direct knowledge of the matter said Monday.
The drilling suspension is part of plans by Reliance, India's largest company by market value, to revamp its exploration program with BP, the person, who didn't want to be identified, told Dow Jones Newswires.
"There is a team of six people, three each from BP and Reliance, that has been looking at the data," the person said, adding that "they will review the work that has been done at the blocks so far and suggest changes." More people will join the team over the next few months, the person said.
The person said Reliance wants to "see to it that it doesn't waste money on drilling dry wells" and "optimize the drilling costs."
BP India didn't immediately respond to a request seeking comments.
Reliance, controlled by billionaire Mukesh Ambani, has been struggling with declining gas output at the D6 block in the eastern offshore Krishna-Godavari basin. KG-D6 is India's richest gas find so far, with estimated reserves of 10 trillion cubic feet, and is likely to generate revenue of $38.3 billion, according to upstream regulator Directorate General of Hydrocarbons.
Reliance's share price has fallen 30% from a year high of INR1,187 in November 2010, to close at INR833.20 Monday on the Bombay Stock Exchange, largely due to worries over KG-D6 production.
Reliance on Aug. 30 closed a $7.2 billion deal with BP to sell a 30% stake in 21 exploration blocks in India, including in the D6, as part of its strategy to utilize the British energy giant's expertise in deepwater drilling to revive oil and production levels.
Experts from Reliance and BP will reconsider the initial drilling plan for both onshore and offshore exploration blocks, and evaluate new data on the highly complex reservoir at KG-D6, the person said.
"The integration process with BP is underway," analysts Anil Sharma and Ravi Adukia at Nomura Financial Advisory and Securities India Pvt. Ltd. said in a note. Joint teams are also reviewing the strategy for developing resources, including maximizing output from the D6 field and setting up an equally owned joint venture for gas sourcing and marketing, they said.
Copyright (c) 2011 Dow Jones & Company, Inc.
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