RIL has already announced plans to start pumping in 80 mmscmd of gas from 2010. RILs president and CEO (oil and Gas) PM S Prasad told FE that the company has submitted development plans to the government for eight more gas discoveries in its prolific D6 block in the KG basin. Once these plans are approved by the government, we will start with the development of these wells also. These additional eight discoveries will be producing around 25 mmscmd of gas. Then, we will also be producing another 9-10 mmscmd gas from the MA oil field in the same D6 block. This will take the total gas production to 115 mmscmd by 2013-14, if everything goes well, Prasad said.
Under the development plan approved by the government for the D6 block, Reliance will invest $5.2 billion in the phase I to develop Dhirubhai-1 and 3 discoveries. The initial rate of gas production from the two fields will be 15-20 mmscmd gas, the production of which is likely to begin by the first quarter of 2009. The gas production will be ramped up to 40 mmscmd by mid-2009 and to 80 mmscmd by 2010. The capacity of the Kakinada terminal, the landfall point for RILs gas, has been designed to handle the increased gas flow from 80 mmscmd in the next 2-3 years to 120 mmscmd by 2013-14.
Prasad said the lifespan of the D1 and D3 gas discoveries is 10-11 years and the peak output from the two fields at 80 mmscmd would sustain for 7-8 years.
In order to sustain the peak output of 80 mmscmd from the two fields for 7-8 years, Reliance will invest another $3.5 billion which will include putting up a compression platform along with drilling additional wells. This will help sustain a peak output of 80 mmscmd, he said.
The two gas discoveries (Dhirubhai-1 and 3) and the one oil discovery (in Dhirubhia-26) fields are amongst the 19 discoveries (18 gas and one oil) announced so far by Reliance in its D6 KG basin block (KG-DWN-98/3) off the Andhra coast. The company has already started producing oil from the D6 block and plans to start producing gas from early 2009. Reliance owns 90% of the D-6 block, while Canadas Niko Resources has the remaining 10% stake.
The initial oil production from the D6 block would be around 7,000 barrels a day and the output is expected to reach 15,000 to 20,000 barrels per day in a month from now. Peak oil output of 40,000 bpd from MA would be achieved in 6-8 quarters, Prasad added that the gas flowing along with the oil is currently being re-injected into the wells and this gas would flow together with Dhirubhai-1 and 3 gas. A peak production of around 115-120 mmscmd by Reliance by 2013-14 assumes significance, as this will not only change the countrys energy scene but would also mean a big fact revenue stream for both Reliance and the government (as profit petroleum).
While currently the price of RILs gas, as approved by the government for five years ie 2012-13 is at $4.21 per million british thermal unit (mmbtu), the new price, when revised after five years, will be much more, at least double of the present gas price if not more.
Even today, price of gas under term contracts are ruling close to $11-12 per mmbtu and in spot contracts at $18-20 per mmbtu levels. As high energy prices are here to stay, it is expected that oil and gas producers would reap rich benefits in the years to come. Reliance Industries chairman Mukesh Ambani has already indicated that the company will earn a quarter of its overall profit from the oil and gas production from its deepwater D6 block in the Krishna Godavari basin from early next year.
The production of 550,000 barrels of oil and oil equivalent (boepd) by RIL in the next 18 months amounts to 40% of Indias indigenous production of hydrocarbons. This would also mean a savings of at least $20 billion to the nation (at current rates of $100 a barrel of oil and $4.21 per mmbtu of gas), which imports 70% of its crude oil requirement. Indias oil import bill for 2008-09 is estimated at close to $77 billion as against $67 billion in the previous year.
RIL has already started with the commercial sales of the crude oil to the refineries on the east coast including HPCLs Vizag and IOCs Chennai Petroleum. Currently the sales are being done through spot contracts and once the production reaches a peak rate of 40,000 barrels of oil per day, crude oil sales will be done through long term contracts with the refiners.