Natural gas flows from RIL's KG basin

Reliance Industries created history when natural gas from its deep-sea Krishna Godavari basin fields flowed to surface today, a fleet achieved in flat seven years that will transform India's energy landscape. "Natural gas production from wells started at 1700 hrs yesterday and it reached the onland receiving facility at Gadimoga in Kakinada district of Andhra Pradesh this morning," a source, in 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 hours," the source said. A company spokesperson confirmed start of gas production, but did not give details. "We will be issuing a statement shortly," he said. Reliance took just seven years from the date of discovery to begin gas production from the deep-sea KG-D6 block as against the global practice of a minimum nine years. The gas would boost power supply from idle electricity generators starved of fuel and produce cheaper urea for agriculture. "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 Directorate General of Hydrocarbons V K 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 meters 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. "Whenever I have interacted with officials from global oil majors like Chevron and BP, they have been highly appreciative of the project management skills of Reliance," Sibal said. 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. "Our endeavour is to quickly ramp it up to peak 80 mmcmd. We are targeting the peak-out by year-end (2009 calendar year)," company's head of oil and gas business P M S Prasad had stated last week. If achieved by 2009-end, the peak output will come a year earlier than previously planned. Of the 18 wells drilled in the Phase-I of the project, six would be put on production initially and the remaining would be hooked up one by one. 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 the 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.