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RIL gas flows from KG-D6; India to save $9 bn in oil import

This article was posted on Apr 2, 2009 and is filed under Stock News

New Delhi: Billionaire Mukesh Ambani-run Reliance Industries has begun natural gas production from its deep-sea Krishna Godavari basin fields, a history-making feat that will help India save USD 9 billion in oil imports a year.

RIL took just six-and-half years from discovery to begin gas production from the deep-sea KG-D6 block as against the global practice of 9-10 years, the firm said in a statement.Dhirubhai-1 and 3, the first two of the 18 gas finds in KG-D6 that have been put to production, will transform the energy landscape by boosting power supply from idle generators starved of fuel and produce cheaper urea for agriculture.

“Natural gas production from wells started at 1700 hrs on Wednesday and it reached the onland receiving facility at Gadimoga near Kakinada in Andhra Pradesh this morning,” a source in the know of the development said.

It took 13-14 hours for the gas to travel from the sea bed to the onshore facility. “The flare (at Gadimoga) lit up at 0920 hrs,” the source said.

The 15 million cubic metres per day of KG-D6 gas allocation to urea-making plants will help save the country about Rs 3,000 crore per annum in fertiliser subsidy. Another 18 mmcmd of gas will go to power plants, with one mmcmd capable of producing 250 megawatt of electricity.

Petroleum secretary RS Pandey said the output will rise to 40 mmcmd by July and to peak 80 mmcmd in a year, doubling domestic gas production.

“Gas sales will generate USD 42 billion in revenues over the 11-year life of the field… the government’s share is likely to be a minimum USD 14 billion,” Pandey said.

Output at the beginning of production at 2.5 million cubic metres and will gradually increase. “Tomorrow it will become five mmcmd,” he said.

The first, of the 15 fertiliser plants, that will get all of the initial output, is expected to get the gas in 3-4 days time, he said, adding, “The most distant plant will get the gas in about 15 days.”

“It will reduce oil import bill by 10 per cent or about USD nine billion annually, during peak production, at current prices,” he said.

RIL will earn USD two billion in revenues from gas sales in 2009-10.

The company said gas from offshore is being received at its world-class onshore facility at Gadimoga, a small village in the East Godavari district, and delivered to the East West pipeline of Reliance Gas Transportation Infrastructure Ltd.

“Reliance has created history and has once again demonstrated its ability to implement complex projects at par with the best performance benchmarks in the world,” company chairman and managing director Mukesh Ambani said.

“The clean energy from the Dhirubhai 1 and 3 discoveries of the KG-D6 block will be a boost for energy security and growth of India,” he added.

“The much awaited gas production, which is the most significant discovery in the country in 30 years after Bombay High was discovered in mid-70s, started yesterday evening,” the Oil Secretary said.

With this project, RIL has joined a select club of global deepwater operators.

“It is a landmark in the history of oil and gas production. World over, this has created a new benchmark for deep-sea developers,” said director-general of Hydrocarbons VK Sibal.

The USD 8.835-billion (Rs 44,175 crore) project will double domestic natural gas production when the field hits its peak output of 80 million cubic metres per day in 2010.

It will wipe out fuel deficit at urea-making fertiliser plants and meet half of the 36-mmcmd gas shortfall in power plants. Reliance will produce enough gas to meet about a third of the UK demand.

The gas output will start at 10 mmcmd and rise by the same volume every month to reach 40 mmcmd by July-end.

“Each well is capable of producing 5-6 mmcmd gas,” Sibal said. Eight wells would be put to production by July and another 10 by the year-end.”

This achievement is especially commendable as the Bay of Bengal is known for its extremely hostile weather conditions, inundated with storms, cyclones, waves up to 20 metres in height and sub-sea currents of over four knots, except a fair weather window of four months every year, the RIL statement said.

If output is doubled to 80 mmcmd by 2009-end, the peak output will come a year earlier than previously planned.

Besides doubling the nation’s domestic gas production, KG-D6 gas would displace costly naphtha or imported LNG as fuel at power and fertiliser plants.

At USD 4.2 per million British thermal unit, KG-D6 gas is 25 per cent cheaper than the fuel produced by UK’s BG-operated Panna/Mukta and Tapti fields in western offshore and 20 per cent cheaper than liquefied natural gas (LNG) imported on long-term contracts.

“KG-D6 gas will replace about seven per cent of India’s oil consumption in 2009-10, rising to 14 per cent in the following three years,” Goldman Sachs said recently in a report.

Besides, it would also reduce Asia’s third-largest oil consuming nation’s current account and fiscal deficits and support economic growth .

“All else being equal, the current account deficit could improve by 0.2 per cent of GDP in 2009-10, and progressively go higher to an average improvement of 0.6 per cent of GDP in 2010-11 to 2013-14,” the report said.

source: DNAINdia

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