Reliance Industries (RIL) is just hours away from transforming India's energy landscape when it starts natural gas production from its Krishna Godavari basin fields.
Gas from the prolific KG-D6 block will not just help boost power supply from idle electricity generators starved of fuel and produce cheaper urea for agriculture, it will give the government $28 billion (Rs 1,40,000 crore) in profit share and royalty over the life of the field.
"Reliance is doing last minute checks and gas (from KG-D6 block) can start flowing as early as tomorrow," a source close to the development said.
The $8.835 billion (Rs 44,175 crore) project will double domestic natural gas production when the field hits 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.
RIL will produce enough gas to meet about a third of UK demand, the source said.
The gas output which will start at 10 mmcmd and rise by same volume every month to reach 40 mmcmd by July end. "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 give displace costly naphtha or imported LNG as fuel at power and fertiliser plants.
At $4.2 per million British thermal unit, KG-D6 gas is 25 per cent cheaper than 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.
The source said according to estimates, the government would earn $25 billion (Rs 1,25,000 crore) in profit petroleum over the life of Dhirubhai-1 and 3 fields, the first two of the 18 discoveries in KG-D6 block that the company is putting to production currently.
Profit petroleum is the share of revenues the government as the owner of all mineral resource in the country is entitled. The government's share of profit petroleum remains lower in the initial period of the project and goes on increasing as the profitability index of the contractor increases when production peaks up.
Besides, $2.9 billion (Rs 14,500 crore) would accrue to it on account of royalty, the source said.
