Sucheta Dalal :Reliance & Hardy hit a dry well in KG Basin
Sucheta Dalal

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Reliance & Hardy hit a dry well in KG Basin  

October 23, 2009

One well of Reliance Industries in the KG basin has turned out to be dry which has meant a loss of just Rs100 crore for the company but this has led to a loss of Rs17,420 crore of market capitalisation in a few minutes. The news of the dry well has sent shock waves across the market, with investors fearing that success ratio is not high enough in KG basin. Investors sold off Reliance shares (down by 5% to Rs2,041) fearing that more wells could turn out to be dry in the money-making oil and gas basin. In D6 block in the same area, Reliance is producing 40 million cubic metres of gas per day.

 

Reliance had 90% interest in D9 block and that was shared by Hardy Oil and Gas for the remaining 10%. Hardy Oil and Gas, the exploration and production group, has kicked off a four-well drilling campaign in the D9 block. It drilled 4,875 metres in the first well in the sub-sea area and could not find substantial traces of oil and gas. Industry analysts say that the approximate cost for deep drilling of 4,875 metres is in the range of Rs 80 crore to Rs 100 crore per well. Krishna Godavari basin on the east coast of India covers an area of approximately 11,605 square km. The well has now been plugged and abandoned.

Hardy Oil and Gas is a UK-based company and its share prices crashed by 40% during the day. The company also has exploration blocks in D3 blocks in Krishna Godavari Basin in India. Hardy Oil and Gas is an upstream international oil and gas company whose assets are principally in India and Nigeria. Its portfolio includes a blend of exploration, appraisal, development, and production assets Recently, Reliance has returned 14 blocks to the government saying that it could not find oil in these blocks. The company has spent over Rs 1,400 crore in these blocks which cannot be recovered. The news of a dry well comes at a bad time for Reliance Industries which is in a lawsuit with Anil Ambani in the Supreme Court. Anil Ambani has claimed gas worth 28 million cubic metre per day from D6 block at the price of $2.34 per mmbtu as against government settled price of $4.2 per mmbtu.
Dhruv Rathi  [email protected]

 


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