RIL to start gas production in KG basin from next year

Mumbai: Reliance Industries will be ready to sell gas from its Krishna Godavari offshore basin from the January-March quarter next year.

Commercial production of gas from the D6 block in the KG basin would start from January-March quarter, said Mr Mukesh Ambani, Chairman, RIL, at a news conference called to announce the commencement of oil production from the block.

Mr Ambani said the crude, which started flowing on September 17, is now stabilised at 5,000 barrels a day, and would be scaled up to 5.5 lakh barrels of oil equivalent a day over the next four to six quarters. This would account for 40 per cent of domestic output. Gas would account for 90 per cent of production from the D6 block, and crude the rest.

The gas from the D6 block is currently being injected back. By fiscal 2010, oil and gas would contribute 25 per cent of the RIL’s profits, against 2 per cent currently, he said.

RIL would sell gas at Government-approved prices. The company is currently prevented from selling gas to third parties (other than to NTPC and Reliance Natural Resources Ltd) by a court order. Mr P.M.S. Prasad, CEO & President of Oil & Gas, declined to comment on what would happen if the court verdict went against RIL, saying the matter was sub-judice.

The dispute in court is about the gas supply agreement between RIL and the Anil Ambani-owned RNRL, at a price which is below current market price.

Mr Ambani said production from RIL’s fields will have an enormous impact on “the fortunes of India and Reliance”, contributing to foreign exchange and import bill savings of $20 billion a year.

Gas production would start with 15 mscmd (million standard cubic metres a day) and later be ramped up to 40 mscmd in a few months’ time.

Mr Prasad said the gas would be sufficient to feed 100-120 million households, power 50 million two-wheelers, 5 million cars and 10 million trucks, as well as supply fuel for 25,000 MW of power.

Reliance owns 90 per cent of the D6 block, and Canada’s Niko Resources owns the rest.

Since RIL faces no scarcity of either capital, technology or talent, a third partner is not under consideration currently, but a good value proposition might change that, said Mr Prasad. If someone were to give RIL a share in an equally productive asset in other parts of the world, the possibility of a partnership cannot be ruled out, he said.

The initial oil output from the D6 block is to be sold to Hindustan Petroleum and possibly Chennai Petroleum. The crude has to be tested at these customers’ end, said Mr Prasad. Term contracts would be entered into only after production stabilises at 40,000 bpd.