RIL starts oil production, gas next year

OIL SPOILS: RIL's Mukesh Ambani and wife Neeta with bottles of crude oil from the K-G Basin in AP. (pic: AP photos)

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Mumbai: The Rs 1,392.69-billion ($34.7-billion) Reliance Industries Limited (RIL) on Sunday announced the production of oil from one its largest hydrocarbon assets in the country and said it will also start tapping natural gas from the fields early next year.

“This will have a huge significance for India's economic development,” RIL chairman Mukesh Ambani said at a press conference here, adding that some 5,000 barrels of oil a day will initially be pumped from the Krishna-Godavari basin's D6 block (KG-D6).

"This will be ramped to 550,000 barrels per day in the next six quarters," he said, terming it as a "major victory in the battle for energy security".

The KG-D6 is located in the south-eastern coast of India in the Bay of Bengal at a water depth of 8,000 feet.

It was awarded to the consortium led by RIL and Niko Resources Ltd in the first round of auction of hydrocarbon assets in 1999.

Ambani said by starting production within two years of its discovery, KG-D6 has become one of the fastest greenfield deepwater oil development projects in the world.

India, which currently imports some 70 per cent of its crude oil needs, is falling far short of its galloping demand for fuel, especially in the power and fertiliser sectors.

Ambani said that with Reliance's contribution, domestic hydrocarbon production will increase by 40 per cent in the next 18 months.

Gas production from the Krishna-Godavri basin is expected to start in the first quarter of 2009. It will also bring down India's import bill by Rs 1,000 billion per year ($20 billion), Ambani said.

He said the company has now not only joined the elite club of deepwater operators, but is also among the top 20 energy companies in the world.

According to Ambani, RIL aims to become the largest deepwater developer in the world. RIL will also enter into the exploration and production of uranium, he added.

The gas from K-G basin will be sold at a base price of $4.2 per mmbtu (million British thermal unit), compared to the $2.02 quoted by the Oil and Natural Gas Corp (ONGC).

"This is going to change the energy landscape in the country by meeting the requirement of 80 million households. The east coast of India is set emerge as a world class hub," said RIL's president of exploration and production business, PMS Prasad.

The FPSO (floating, production, storage and offloading system), which has been contracted for $733 million, has a production capacity of 60,000 barrels of oil per day and can store up to one million barrels.

"It has been stationed at the oil production site and shuttle vessels will be used for offloading oil from the FPSO and carrying the produce to the coastal refineries," Prasad added, saying this will eliminate the need for piping the oil to the shore for onward transportation to refineries.

However, RIL indicated it may not refine the oil at its existing and soon-to-be commissioned Jamnagar refineries but instead, sell it to public sector refiners like Hindustan Petroleum's Visakhapatnam refinery.

The utilisation of the gas is still embroiled in controversy, with RIL and younger brother Anil Ambani's Reliance Natural Resources Ltd locked in litigation in the Bombay High Court over sharing of natural gas from the K-G basin.

The next hearing is slated for September 30.