ONGC, RIL plan Rs 5,000cr gas unit

NO MORE ON SLIPPERY GROUNDS

Oil and Natural Gas Corporation (ONGC) and Mukesh Ambani-controlled Reliance Industries may tie up to build a common gas processing unit as the two firms have discovered huge reserves in the Krishna-Godavari basin, touted as "India's North sea." Setting up such an offshore gas processing unit involves an investment of around Rs 5,000 crore.

ONGC, the country's largest upstream company, has recently discovered gas in the KG-basin. Initial estimates suggest that the gas find could be as large as 21 trillion cubic feet (tcf). Reliance has already announced a 14 tcf find, besides discovering a "large gas layer" in a new well in its D-6 field.

Although the two have not yet formally initiated talks, executives of both firms say a joint gas development programme could very much be on the cards. "It makes sense to jointly develop a processing unit as the costs involved are huge," a senior ONGC official said.

Reliance's D-6 block lies adjacent to the KG-DWN-98-2 of ONGC. Meanwhile, an executive from Reliance said that the firm was willing to transport ONGC's gas through its east-west pipeline. "We are open to transporting anyone's gas through our pipeline," the executive added.

Gujarat State Petroleum Corporation (GSPC), which has also announced a gas find of 20 tcf in the area, is in talks with Reliance for using its pipeline. Reliance is planning two pipelines from the Andhra coast.

One is to the west coast and the other towards Bengal. Currently, the gas capacity of the pipeline is 100 million metric standard cubic metres per day (mmscmd). Recently, Reliance increased its gas production estimates from KG-basin to 80 mmscmd.

A few officials of ONGC are, however, doubtful of the company using Reliance's pipeline. "With Reliance themselves finding gas in the area, they will have enough gas to fulfill the pipeline's capacity," a senior official said.

Analysts see a joint gas processing as "highly probable" and also expect to see pipeline sharing, as "duplication of resources is not desirable."

"Unless Reliance revises its gas production upwards from K-G basin, it pays to share the infrastructure," an analyst said.

The Petroleum Regulatory Bill provides for unbundling of the marketing and transportation businesses. "State-owned oil companies need not fear that Reliance's pipeline may not be able to accommodate their gas. Once a deal is signed, the regulator will be there to address their needs," said an energy analyst.