Reliance Industries Ltd and its partners BP Plc of the UK and Canada's Niko Resources have decided to relinquish the D4 oil and gas block in the Mahanadi basin, north of RIL's main D-6 block in the Krishna-Godavari basin off India's east coast.
The development comes amid sharply dwindling output from the D-6 basin, which has thrown the government's fuel projections out of gear and led to friction with RIL as the government has held back approvals of production costs claimed by RIL under its agreement with the government.
The D4 block was estimated to have twice the gas reserves of the D6 block. In 2010, Niko Resources chief executive Edward S Sampson had said: ''I feel it (D4) is twice the size of D6. We feel we have got prospective potential of up to 100 trillion cubic feet of gas. It would change India.''
However, these projections were obviously premature.
Niko said in a statement from its Calgary, Alberta headquarters that the decision stemmed from the current geological assessment related to the size of the trapping mechanism and the commercial environment currently prevailing in India.
BP spokesperson Robert Wine said from London that it would not like to comment as Reliance was the operator of the gas fields. While there was no official word from RIL, Reuters quoted an official saying ''the block is being relinquished as it was found to be commercially not viable''.
Niko was required to conduct seismic work and drill three exploration wells until June 2013 in the block, which is spread over 17,000 sq km, according to information on its website.