Reliance spuds first exploration well in 5 yrs

New Delhi (PTI): Reliance Industries has spud its first exploration well in more than five years on the flagging natural gas fields in KG-D6 block as it looks for new reserves to supplement falling output. The MJ-1 exploration well on the Dhirubhai-1 and 3 gas fields in the KG-DWN-98/3 or KG-D6 block "was spud in early March and is drilling ahead," said Niko Resources, the firm's minority partner in the Krishna Godavari basin block. The well is targeting a Mesozoic synrift clastic reservoir, similar to the producing MA oil and gas field in the same block.A The well be drilled over two kilometres deeper than and directly beneath the producing D1&D3 fields in the block. Results of the well are expected in April or May, Niko said. RIL has given the well a pre-drill best case gross prospective resource of 819 billion cubic feet of gas and 56 million barrels of liquids.A Dhirubhai-1 and 3 (D1&D3) gas fields, the largest among the 18 gas finds on KG-D6 block, have proved to be more difficult to produce than previously predicted and RIL is drilling a probe well on the fields to study reservoir characteristic, sources said. D1&D3 reservoir has seen sharper-than-expected drop in pressure and water and sand ingress in production wells, leading to a drop in output.A The fields have seen output fall from 53-54 million cubic metre per day achieved in March, 2010 to about 12 mscmd this month. Together with less than 6 mscmd output from MA oilfield in the same block, KG-D6 is producing about 17 mscmd. MJ-1 well will probe the Mesozoic synrift clastic reservoir lying below the D1-D3 (Pliocene) Mining Lease area.A While RIL is the operator of KG-D6 block with 60 per cent interest, UK's BP Plc holds 30 per cent and Niko has the remaining 10 per cent.A Sources said RIL had more than a year back proposed to drill the MJ-1 well but permission for the same came only this year. The approval came with the riders that the cost of such wells will not be allowed to recovered unless it leads to a commercial oil and/or gas discovery.A Sources said RIL and its partners will invest $350-450 million in the KG-D6 block in the fiscal year ending March 31, 2014 and $400-500 million in the year to March 31, 2015. The investments include expansion of water handling and compression facility at D1&D3 fields, additional gas production well and compressor modification on the MA field and drilling of the MJ-1 prospect.