Speaking with FE, PMS Prasad, CEO and president of oil and gas with RIL said, We want to make up the loss of time value by trying to ramp up the D6 gas production capacity to 80 mmscmd by end of December. As per the original plan, we were supposed to commence the gas production in the third quarter of 2008-09 and achieve the production of 40 mmscmd by March. However, due to weather conditions in particular and other factors, the production has to be postponed and now we expect to start production from mid of March or early April.
Prasad made it clear that advancing the gas production to 80 mmscmd by December end will be possible technical limits and reservoirs. We want to ramp up without damaging reservoirs. In all 22 wells be drilled through three deepwater rigs namely Discover 534, Deepwater Frontier and Deepwater Explorer.
Against the revised development cost of $8.83 billion, the company hopes to spend as high as $5.2 billion to achieve the gas production of 80 mmscmd. We hope to achieve break even in four years since the date of commencement of production, Prasad informed.
RIL had earlier proposed investment of $2.47 billion to produce 40 mmscmd for 7.5 years from discoveries - Dhirubhai 1 and 3 (in the D6 block) - out of a total 34 wells. The increase in cost has been mainly due to a 250% jump in rig chartering rates.
Prasad said initial production will be 12 mscmd which will be further increased to 40 mmscmd. Of the 40 mmscmd of gas, as many as 18 mmscmd of gas will be allocated to the gas starved power sector and balance to the fertiliser sector, LPG sector, steel and other captive power plants across the country. In all probabilities, power plants may get natural gas by later part of April as the GAIL connectivity has already been laid, he added.
He argued that the ramping up of gas production to 80 mmscmd at the earliest was necessary as even after the allocation of 18 mmscmd of gas to the power sector, the power ministry has estimated requirement of another 20 mmscmd, 18 mmscmd by the fertiliser sector which is together is almost 58 mmscmd and the balance is needed by other sectors and refining. This does not include allocation to around 18 mmscmd of gas to RILs production facilities and its captive power plants at various locations.
Increasing production to 80 mmscmd makes a sense even from cash flow point of view. For five years the price will remain same at $4.20 per million British thermal unit as fixed by the empowered group of ministers, he noted. Nearly 5 mmscmd will be allocated to the city gas distribution.
He was hopeful of producing oil of 40,000 barrels per day by December 2009 from its floating production and storage offloading (FPSO) facility in the KG D basin. He informed that the production at the FPSO, which has been stopped due to bad weather conditions, is expected to restart within a week. According to Prasad, the FPSO has the gas production capacity of 9 mmscmd.