The real story about the Krishna-Godavari basin is not the spat between the Ambani brothers and the companies that they run, but what the gas discoveries there mean for the country’s energy scenario. This is a question that goes beyond the initial question of improving energy security by raising the level of energy self-sufficiency. The director-general of hydrocarbons, VK Sibal, has been reported as saying that the gas output from the field, being managed off the coast of Andhra Pradesh by Reliance Industries, could be nearly four times the levels committed by the company so far, namely 80 million metric standard cubic metres per day (mmscmd); the current level of production is about 36 mmscmd. If indeed it is true that output could nearly quadruple, to about 300 mmscmd, the enormous significance of that figure needs to be understood.
In terms of oil equivalence, it would amount to nearly 2 million barrels of oil per day—which is India’s total current consumption of oil, most of it imported. Gas consumption is over and above this. Mr Sibal will need to confirm the numbers, because it is difficult to square a four-fold increase in consumption with the reported size of the field (between 10 and 11 trillion cubic feet of reserves). The implication is that the reserves are much more than reported so far. The company should by rights make a clear statement on the subject because this is stock market-sensitive information. If both confirm the new production potential that has been reported, it would mark the most significant energy development since Independence, beating handsomely the discovery and subsequent development of Bombay High oil in the 1970s and 1980s.
This comes on top of the production of oil from the Mangala field in Rajasthan by Cairn Energy late last month. The country’s oil production will increase by 20 per cent, once Cairn reaches full production. In a third development, it has been confirmed that the Gujarat State Petroleum Corporation will be producing 10-12 mmscmd of gas in a little over two years from now. With the KG basin almost certainly holding more gas than has been discovered so far (only about a third of the total potential for exploration wells has been drilled so far), India could cease to be the energy-deficient economy that it has been all along.
Gas consumption is of course growing rapidly in the country, and its potential for further use is almost limitless. The power and fertiliser sectors, for instance, could use up large quantities. Just two companies, NTPC and Reliance Natural Resources, are in court with their claims to a combined total of 40 mmscmd. Other industrial users, in the petrochemical sector, are already lining up with their demands for gas. Cities are being piped for domestic gas delivery. Transport networks could switch to gas, as Delhi’s has done. While the economist Vijay Kelkar (who has also been petroleum secretary) may have over-stated it when he talked of India becoming gas surplus, the fact is that rapid domestic increases in gas production could transform the economy. Energy costs would come down because domestic gas is cheaper (it avoids long-distance transport costs), trade balances would improve, and since gas provides clean energy it would improve India’s position in the climate control talks because the emission of greenhouse gases per unit of GDP would fall. All the more reason why Mr Sibal and Reliance Industries need to confirm what is the KG basin’s true level of reserves and production potential.
