Reliance Industries Ltd on Thursday announced the commencement of gas production from one of the world’s largest gas discoveries that took place in in 2002 in the Krishna-Godavari (KG) basin in the Bay of Bengal. With this, the country is expected to save $9 billion in annual energy import expenditure.
Gas production from Reliance’s $8.8 billion KG-D6 deepwater gas project, of which $5.4 billion has already been invested, is expected to transform India’s energy landscape by doubling the current level of indigenous gas production by 2010.
The news on commencement of gas production saw shares in Reliance Industries climb 5.3 per cent to close at Rs 1,662 on Thursday. The project is expected to generate $42 billion in revenues for Reliance over its life of 11 years. The government's share in the production would amount to a minimum $14 billion.
“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,” Reliance’s chairman Mukesh Ambani said.
At $ 4.2 per million British thermal unit, the KG-D6 gas is 25 per cent cheaper than the fuel produced by UK's BG-operated Panna/Mukta and Tapti fields in the Western Offshore and 20 per cent cheaper than liquefied natural gas (LNG) imported on long-term contracts.
The KG-D6 gas is also expected to substantially reduce India’s dependence on energy imports and bring down subsidy levels in the fertilizer, transportation and other sectors.
Petroleum Secretary RS Pandey said the D6 gas would help India reduce its crude imports by $9 billion a year, or about 10 percent of the import bill in 2008-09. At its peak level of 80 mmscmd (million metric standard cubic metres of gas per day), the production would amount to 44 percent of India’s current oil and gas production taken together, he said.
Besides doubling the nation's domestic gas production, the KG-D6 gas would substitute costly naphtha or imported LNG as fuel at power and fertiliser plants. The gas would also boost power supply from idle power plants starved of fuel and produce cheaper urea for agriculture. Reliance will pump gas at the rate of 2.5 million standard cubic metres of gas per day (mmscmd) to reach 10 to 15 mmscmd of gas in the next few days. By 2010, output from D6 will be increased to 80 mmscmd, doubling India’s gas production capability.
Gas from the KG D6 deepwater block will be piped to an onshore facility at Gadimoga --a small village in the East Godavari district of Andhra Pradesh, before it is delivered to the consumers. Reliance operates D6 with a 90% stake, with Canada's Niko Resources holding the remaining 10%.