Reliance banks on oil, gas to drive growth

The oil and gas business is expected to emerge as a growth driver of Reliance Industries, which aims to garner over Rs 40,000 crore from this business in two years.

Reliance Industries, which on Thursday approved the mobilisation of $2 billion (nearly Rs 9,000 crore) through syndicated loan or issue of foreign currency convertible bonds, aims to produce 450,000 barrels of oil a day in 2008-09.

At the ruling market price of $59 a barrel, the production should fetch over Rs 40,000 crore. Now, the company earns nearly Rs 1,000 crore from oil and gas business. Refining is the highest money spinner now with sales of Rs 52,000 crore, while petrochemicals business earned Rs 30,000 crore last year.

The increased contribution from oil and gas will also enhance the company's total business. Last year, Reliance recorded a business of Rs 89,124 crore.

A source in the company said Reliance had recently sought the government's permission to double production rate to 80 million standard cubic metre per day (mmscmd), which is equivalent to 450,000 barrels in the KG basin. The first gas from this project is expected in 2008-09.

This follows the company's estimated gas reserve to 11.3 trillion cubic feet from the earlier 6 trillion cubic feet from this region.

He said the company will require $5.2 billion against the previous estimate of $2 billion to fund the increased oil production and exploration. Of $5.2 billion, the company will raise $2 billion through foreign currency debt, while the balance will be mobilised through internal accruals.

The deepwater block at KG basin off the east coast of India was awarded to Reliance and NIKO Resources under NELP-1 bidding round. RIL, as operator of the block holds 90 per cent of the participating interest, while NIKO has 10 per cent.

The block covers an area of 7,645 sq km and its north-western boundary is about 40-60 km south east of Kakinada in Andhra Pradesh. The water depth in the block ranges up to 2,700 m.

In June, Niko Resources, Reliance's partner in the block, had increased its estimates of natural gas reserves by 197 per cent to 35.4 trillion cubic feet. In September, the company had notified the director-general of hydrocarbons of another discovery, whose potential commercial interest is yet to be established.