Reliance Industries will account for about 40 per cent of the country's energy production in the next 18 to 24 months, putting the company on track to earn a quarter of its profit from oil and gas production, from 5 per cent now.
The total hydrocarbon output from the Dhirubhai 6 (D6) block in the Krishna-Godavari basin, the field that is expected to more than double India's gas output, will rise to 550,000 barrels of oil equivalent a day (boed) by March 2010, RIL chairman and managing director Mukesh Ambani said in his first media meet in five years.
In monetary terms, it's Rs 86,000 crore (Rs 860 billion) a year, Ambani said, adding the D6 block in the KG basin will transform the country's energy landscape.
Speaking at the sprawling Reliance Corporate Park in Navi Mumbai, Ambani termed the start of oil production at the D6 basin three days ago as a historic occasion not only for the company but for the entire country. The initial production from the block was 5,000 boed.
"From nowhere in 2002 as far as oil production is concerned, we are now set to be among the top 20 integrated energy companies in the world. In fact, RIL will be one of the world's largest deep-water oil well developers," a beaming Ambani said, as his wife Nita Ambani, who was sitting next to him, nodded.
"Around 40 years after Bombay High was discovered, this is India's major victory in the battle for energy security. RIL has managed to produce oil in two years - a time other companies would take just to map out their exploration nitty-gritty," Ambani said, looking appreciatively at his top team led by PMS Prasad, president & CEO (oil & gas).
Ambani is investing $5.2 billion to develop the KG basin. This oil production, Ambani said, will not only benefit customers but also reduce subsidies and thus release huge financial resources that the government can spend on development.
The company will start pumping natural gas from the KG basin in the January-March quarter, which is within the broad target of the company but later than the government's forecast that production would begin by November.
Prasad later explained that the delay in gas production is because of tough weather conditions and a tight supply chain. He said the company will produce 90 cubic metres of saleable gas a day starting in January. The same quantity of gas is being produced today and that's being re-injected into the system.
The gas pipeline connecting the east and west coasts is almost complete, Prasad said. The pipeline connects all existing gas networks of GAIL India and Gujarat State Petronet Ltd. Gas will reach customers very quickly, he said.
RIL will have to wait for a court decision before starting gas sales. The court is hearing a case on the sale of gas to NTPC and Anil Ambani-owned Reliance Natural Resources. Prasad hoped the verdict would be made in the near future and declined to comment on the course of action should it be delayed.
"Someone will have to take a decision on the gas dispute soon. Otherwise the country will keep losing $20 billion every year on oil imports," he said. Sources close to the company ruled out any possibility of an out-of-court settlement on the issue.
The company has sold oil to Hindustan Petroleum Corporation and may sell oil to Chennai Petroleum, Prasad said. Reliance plans to look for more spot contracts for oil.
The KG-D6 block in the KG basin, located in the east of Andhra Pradesh coast, was awarded to RIL under the first round of new exploration and licensing policy. RIL holds 90 per cent in the block and Canadian company Niko Resources holds the remaining 10 per cent.
