IndiaPost.com - Ambani to provide India 40% oil needs

MUMBAI: Creating history, Mukesh Ambani-led Reliance Industries says it has begun pumping crude from the country's first deep-sea oilfield even though its much awaited natural gas output will begin not before January 2009.

Mukesh and his wife Nita Ambani took deliveries of the first oil from the 'MA' field in the predominantly gas rich D6 block in Krishna Godavari basin, off the Andhra coast, at a media ceremony at the company's corporate office here. Outlining the ambitious oil and gas production program, Ambani said his company would account for 40-45 per cent of gas and oil produced in India in 6-8 quarters (by up to two years).

"With Reliance's contribution in the energy sector, India's indigenous production of hydrocarbons will increase by over 40 per cent in the next 18 months contributing to foreign exchange and import bill savings of USD 20 billion," Ambani said. "The initial oil flow of 5,000 barrels per day, achieved on September 17, will rise to 5.5 lakh barrels per day of oil and oil equivalent gas (crude oil plus natural gas) in the next six quarters,"

Ambani told reporters after an interaction with editors. While Reliance is free to sell crude oil produced from D6, it is constrained by a Bombay High Court ruling from selling natural gas. The Bombay High Court has barred the company from selling gas from D6 to anyone other than Anil Ambani Group firm Reliance Natural Resources (RNRL) and state power utility NTPC. "40 years after Bombay High was discovered, this is India's major victory in the battle for Energy Security. With this a new frontier area in the deep waters of our East Coast has opened up," Ambani said.

"This event is, no doubt, historic in itself. But there is even better news. For this is just a prelude. It marks the first production from just one field that is part of a larger discovery domain. We can now confidently look forward to production from a series of other fields." CEO and President of RIL's Oil and Gas company, P M S Prasad said RIL took just 27 months to produce oil from MA field, and gas would flow in just six years of its discovery. "Globally, lead time to monetization is 8-10 years," he added. D6 gas will double availability of natural gas in the country.

At present, domestic gas production and imported LNG total up to 91 million standard cubic meters per day (mmscmd) of gas and meet only half the demand. On the legal battle between RIL and RNRL, he hoped the court will decide soon on the matter so that the national resource is optimally utililsed. RNRL claims right over 28 mmscmd of D6 gas as part of the agreement that split the Dhirubhai Ambani empire into brothers Mukesh and Anil.

NTPC claims 12 mmscmd from D6 at USD 2.34 per million British thermal unit (mmBtu) price Reliance had bid in its 2004 gas supply tender. Prasad said RIL will enter into annual contracts once output reaches peak of 40,000 bpd and added that production from the field will rise to 20,000 bpd (one million tons a year) by Diwali next month and double by January 2010. The light and sweet crude (low sulfur) oil that is being benchmarked to Papis and Nigerian Bonny Light crude oils, is initially being sold on spot prices to Hindustan Petroleum Corp Ltd's Vizag refinery.