KGBasin

Reliance Industries’ KG-D6 gas has saved 32 per cent in fertiliser subsidy as urea making plants shifted from costlier liquid fuels to cheaper gas, the Rajya Sabha was informed today.

“The reduction in naphtha usage in existing gas-based unites has reduced the subsidy cost to the government by approximately 32 per cent. The reduction in subsidy by shifting to natural gas has resulted in savings of subsidy bill,” the minister told the Upper House in a written reply.

Fertiliser subsidy is pegged at Rs 49,980.73 crore in 2010-11 fiscal from Rs 52,980.25 crore in the previous year. In 2008-09 fiscal, subsidy was over Rs 1,00,000 crore.

Under fertiliser subsidy, the government would provide Rs 15,980.73 crore for indigenous (urea) fertilisers, Rs 5,500 crore for imported (urea) fertilisers and Rs 28,500 crore for sale of decontrolled fertilisers (DAP, MOP and complexes) with concession to farmers.

Source:http://economictimes.indiatimes.com/news/economy/finance/Reliance-KG-D6-gas-has-saved-32-in-fertiliser-subsidy-Govt/articleshow/5878007.cms

State-run power producer NTPC is likely to sign contracts next week to buy an additional 1.51 million cubic meters a day of gas from Reliance Industries at government-approved price of $4.2 per mmBtu.

The additional gas would be used at NTPC’s Anta and Auriya plants in Rajasthan, Dadri unit in Uttar Pradesh and Faridabad plant in Haryana, official sources said.

Since these plants have already signed Gas Sales and Purchase Agreements (GSPA) for volumes totaling 1.81 mmcmd, only side-letters need to be signed for additional gas.

Sources said side-letters may be signed next week.

This follows Power Ministry’s ultimatum to NTPC to sign contracts immediately. While the government had allocated 4.46 mmcmd of gas from RIL’s eastern offshore KG-D6 field, NTPC has so far signed only for 1.81 mmcmd.

At a recent review of gas withdrawal from RIL’s eastern offshore KG-D6 fields, it was informed that the government had allocated 31.1 mmcmd gas to power sector on firm basis and an additional 12 mmscd on fall back or temporary bais. Against this, only 30.11 mmcmd was been drawn by the power utilities.

It was stated at the meeting that if the power utilities continue to draw less quantity of gas than what has been allocated, there is a possibility that the unutilised gas is allocated to other sectors, they said.

Of the 4.46 mmcmd allocated to NTPC, 2.65 mmcmd was for its Kawas and Gandhar power plants in Gujarat. But the state- owned firm did not want to use KG-D6 gas at these plants since it was in litigation with the Mukesh Ambani firm over fuel supplies to expansion projects planned at these sites.

So, an Empowered Group of Ministers (EGoM) last year decided that the state gas utility GAIL India will swap KG-D6 gas with fuel from other fields. Under this scheme, gas from western offshore Panna/Mukta and Tapti (PMT) fields that was currently supplied to NTPC’s northern India plants, was to be diverted to Kawas and Gandhar. The deficit at the northern India plants was then to be made up by KG-D6 gas.

But since PMT gas supplies to NTPC’s northern plants was only 1.51 mmcmd, a swap of only that volume has been affected.

Sources said GAIL has decided that 1.51 mmcmd of PMT gas that is currently being supplied to NTPC’s northern power plants would be diverted to Kawas and Gandhar. The northern plants will then be supplied KG-D6 gas.

NTPC currently buys 0.79 mmcmd of KG-D6 gas at its Anta, 0.54 mmcmd at Dadri, 0.26 mmcmd at Auriya and 0.22 mmcmd at its Faridabad unit.

With the swap, supplies would go up to 3.31 mmcmd.

RIL currently produces 63-64 mmcmd of gas against a potential of 80 mmcmd as government nominated customers like NTPC are yet to offtake their full allocated quantity.

Source:http://www.business-standard.com/india/news/ntpc-may-sign-for-additional-kg-d6-gas/92099/on

Energy major Reliance Industries should post a second straight increase in quarterly profit, lifted by higher gas output from fields off India’s east coast and a nascent recovery in refining margins.

India’s leading listed conglomerate, controlled by billionaire Mukesh Ambani, has been scouting for acquisitions overseas, and progress on that front will determine its outlook. Reliance, valued at $78 billion, recently said it would pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the United States with Atlas Energy.

The deal followed two failed attempts to buy overseas firms as Reliance looks to expand its presence outside India, break into new markets and broaden its businesses, which include refining, oil and gas exploration and petrochemicals.

“The company has already invested in its own projects such as its gas fields in India and is going to generate a lot of cash flow,” said Deepak Pareek, an oil and gas analyst at Mumbai-based Angel Broking.

“A lot of that cash has to be pumped into overseas growth opportunities and that’s exactly what it’s done with Atlas.” Bankers say more overseas deals could be in the offing. The outcome of a long-running gas dispute with Reliance Natural, led by Mukesh’s younger brother Anil, will also have a bearing on the company’s outlook.

Reliance is unable to hit peak gas production of 80 million standard cubic metres a day (mmscmd) at its D6 block in the vast Krishna Godavari basin in the Bay of Bengal due to customers not buying allocated volumes, and a lack of pipelines. But analysts say current production of 63-64 mmscmd is still enough to boost results.

Reliance began pumping gas from the block in April last year. Analysts estimate gross refining margins (GRMs), a key measure of profitability, will have dropped about 16 per cent year-on-year in the March quarter to $8.30 a barrel, tracking a decline in Asia’s benchmark Dubai crack margin.

Reliance GRMs nearly halved to $5.90 a barrel in the December quarter. The company’s results will be helped by its acquisition last year of unit Reliance Petroleum. State-run explorer Oil and Natural Gas Corp is expected to post higher earnings on firmer oil prices, but subsidy payouts the group is required to make to state retailers will keep results muted.

A lack of clarity about the government’s subsidy rules means analysts estimates for ONGC are often disparate. “What you’d want to bet on is a company’s business or its management decisions,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. “But here you are betting on whether a government policy will change or not, which just can’t be figured out.” Energy major Reliance Industries should post a second straight increase in quarterly profit, lifted by higher gas output from fields off India’s east coast and a nascent recovery in refining margins.

India’s leading listed conglomerate, controlled by billionaire Mukesh Ambani, has been scouting for acquisitions overseas, and progress on that front will determine its outlook. Reliance, valued at $78 billion, recently said it would pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the United States with Atlas Energy.

The deal followed two failed attempts to buy overseas firms as Reliance looks to expand its presence outside India, break into new markets and broaden its businesses, which include refining, oil and gas exploration and petrochemicals.

“The company has already invested in its own projects such as its gas fields in India and is going to generate a lot of cash flow,” said Deepak Pareek, an oil and gas analyst at Mumbai-based Angel Broking.

“A lot of that cash has to be pumped into overseas growth opportunities and that’s exactly what it’s done with Atlas.” Bankers say more overseas deals could be in the offing. The outcome of a long-running gas dispute with Reliance Natural, led by Mukesh’s younger brother Anil, will also have a bearing on the company’s outlook.

Reliance is unable to hit peak gas production of 80 million standard cubic metres a day (mmscmd) at its D6 block in the vast Krishna Godavari basin in the Bay of Bengal due to customers not buying allocated volumes, and a lack of pipelines. But analysts say current production of 63-64 mmscmd is still enough to boost results.

Reliance began pumping gas from the block in April last year. Analysts estimate gross refining margins (GRMs), a key measure of profitability, will have dropped about 16 per cent year-on-year in the March quarter to $8.30 a barrel, tracking a decline in Asia’s benchmark Dubai crack margin.

Reliance GRMs nearly halved to $5.90 a barrel in the December quarter. The company’s results will be helped by its acquisition last year of unit Reliance Petroleum. State-run explorer Oil and Natural Gas Corp is expected to post higher earnings on firmer oil prices, but subsidy payouts the group is required to make to state retailers will keep results muted.

A lack of clarity about the government’s subsidy rules means analysts estimates for ONGC are often disparate. “What you’d want to bet on is a company’s business or its management decisions,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. “But here you are betting on whether a government policy will change or not, which just can’t be figured out.”

Source:http://reliance-news.blogspot.com/2010/04/gas-sales-to-lift-reliance-results-m.html

State-owned power utility NTPC will buy an additional 1.5 million cubic meters a day of gas from Reliance Industries at government-approved price of $4.2 per mmBtu to feed its power plants in north India.

The government had allocated NTPC 4.46 mmscmd of gas from RIL’s eastern offshore KG-D6 fields but it currently draws only 1.81 mmscmd due to resistance from state gas utility GAIL to transport additional volumes, official sources said.

Close to 60 per cent of the allocated volumes were for NTPC’s Kawas and Gandhar power plants in Gujarat. But the state-owned firm did not want to use KG-D6 gas at these plants since it was in litigation with the Mukesh Ambani firm over fuel supplies to expansion projects planned at these sites.

So, an Empowered Group of Ministers (EGoM) last year decided that the state gas utility GAIL India will swap KG-D6 gas with fuel from other fields. Under this scheme, gas from western offshore Panna/Mukta and Tapti (PMT) fields that was currently supplied to NTPC’s northern India plants, was to be diverted to Kawas and Gandhar. The deficit at the northern India plants was then to be made up by KG-D6 gas.

Sources said GAIL was however not willing to implement this. It feared that if PMT gas was supplied to Kawas and Gandhar, it would displace the costlier LNG that those plants currently bought. Kawas and Gandhar currently buy imported-LNG at about 50 per cent more price then the delivered cost of RIL gas.

The Petroleum Ministry, they said, a few days back convened a meeting to convey to GAIL in no uncertain terms that the EGoM decision has to be implemented at all cost.

It was decided that 1.5 mmscmd of PMT gas that is currently being supplied to NTPC’s northern power plants would be diverted to Kawas and Gandhar. The northern plants will then be supplied KG-D6 gas.

GAIL markets gas from PMT fields which is priced at $5.65-5.73 per million British thermal unit.

Sources said the scheme would be implemented in couple of weeks. NTPC has contracted 0.79 mmscmd of KG-D6 gas for its Anta plant in Rajasthan, 0.54 mmscmd for Dadri unit in Uttar Pradesh, 0.26 mmscmd for its Auriya plant in Rajasthan and 0.22 mmscmd at its Faridabad unit in Haryana.

With the swap, supplies would go up to 3.31 mmscmd. This would still leave 1.15 mmscmd of allocated quantities to be supplied.

RIL currently produces about 63-64 mmscmd of gas as against a potential of 80 mmscmd as government nominated customers like NTPC are yet to offtake their full allocated quantity.

KG-D6 gas has replaced costly imported LNG at Anta plant to save Rs 150 crore in power generation cost annually.

Source:http://economictimes.indiatimes.com/news/news-by-industry/energy/oil–gas/NTPC-to-buy-15-mmscmd-more-gas-from-RIL/articleshow/5784912.cms

Indian energy giant Reliance Industries will pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the U.S. with Atlas Energy, becoming the latest foreign company to invest in shale plays that are expected to be very lucrative.

Reliance, controlled by billionaire Mukesh Ambani, has been working hard to expand its presence outside India, break into new markets and broaden its various businesses including refining, oil and gas exploration and petrochemicals.

India’s largest listed firm will pick up a 40 percent stake in Atlas’s operations in the booming Marcellus Shale — a gas project that spans parts of Pennsylvania, West Virginia and New York in the United States and which, according to some geologists, could hold enough natural gas to satisfy U.S. demand for a decade.
With this move it joins a number of international oil companies including BP Plc, Total, Statoil and Mitsui & Co who have bought into shales, rock formations that could hold vast amounts of natural gas.

While the shale formations have proven to be lucrative, they are also very expensive to develop and environmentally sensitive. The joint ventures have given the independent oil companies who own much of the acreage in these areas access to capital and should allow foreign oil companies to pick up expertise in new drilling techniques developed for the shales.
“This marks Reliance’s foray into a totally new venture altogether. Reliance is going to generate a lot of cash flows going ahead and investments in shale gas could be a good growth opportunity,” said Deepak Pareek, oil and gas analyst with Angel Broking.

Reliance Chairman Ambani, who according to Forbes is the world’s fourth-richest man with a net worth of $29 billion, has made no secret of the firm’s overseas ambitions as the company has raised a war chest of $2 billion by selling stock in recent months.

But Reliance, founded by Ambani’s father Dhirubhai, a school teacher’s son, had not met with much success until now in its foreign takeover attempts.
Bankrupt petrochemicals firm LyondellBasell recently rejected a bid from Reliance that valued the target at about $14.5 billion, and the Indian firm also lost a race for Canadian oil sands firm Value Creation, in which it wanted to take a majority stake for $2 billion.
Shares in Reliance closed up 1.8 percent on Friday, while the Mumbai market rose 1.2 percent.

Atlas Energy shares jumped $6.44, or 20.3 percent, to $38.25 on the Nasdaq on Friday.

Shares of other companies with acreage in the Marcellus Shale, including Exco Resources and Range Resources, were also boosted by the news.
More joint ventures in the region can be expected to follow, bankers said. Exco, in particular, should be closely watched. Chief Executive Doug Miller said in February that the company was in discussions for a potential joint venture with its acreage there.
JOINT VENTURE

Atlas’s core Marcellus position consists of about 300,000 acres, largely in southwestern Pennsylvania, out of which about 120,000 acres will go to Reliance, the companies said.
Upon closing Reliance will pay about $340 million in cash and must also contribute $1.36 billion to the joint venture to develop the shale project, Atlas said in a statement.

Reliance is paying around $14,000 an acre for its share of the Marcellus acreage, which is in line with what Japan’s Mitsui paid for its joint venture with Anadarko Petroleum Corp announced in February [ID:nN16229402]. Still, the price is more expensive than most of the previously announced deals.
The members of Atlas’s management team have a background in finance and are known for their deal making skills, said Marshall Carver, energy analyst at Capital One Southcoast in New Orleans.

Atlas Energy Chairman Edward Cohen is also chairman of Resource America Inc, a publicly traded asset management company, and Chief Operating Officer Richard Weber was head of energy investment banking at KeyBanc Capital Markets from June 1997 to March 2006.
“This deal was certainly done at a good price” for Atlas, Carver said.

Atlas will serve as the development operator for the joint venture, and will retain a 60 percent undivided interest in the acreage.
Reliance will have the option to buy 40 percent in all new acreages, and also has the right to first offer for potential future sales by Atlas of about 280,000 additional Appalachian acres controlled by the U.S. firm.

Debate over drilling in the region has sharpened in recent months. Environmentalists claim the drilling fluids needed to crack the rock and free the gas can contaminate drinking water, an assertion the industry hotly disputes.
Jefferies & Co was the lead financial advisor, while J.P. Morgan Securities was another advisor to Atlas.

Barclays advised Reliance on the deal, which is expected to close by the end of April.

Source:http://www.nytimes.com/reuters/2010/04/09/business/business-us-reliance-atlas-marcellus.html?_r=1

Reliance Industries has informed oil regulator DGH that four smaller gas finds surrounding the D-1 and D-3 fields in the Krishna-Godavari basin can be commercially exploited.

RIL on February 19 informed the oil regulator Directorate General of Hydrocarbons (DGH) that four smaller gas finds, surrounding the D-1 and D-3 fields, which are currently producing around 62 mmscmd of gas, can be commercially exploited, sources in know of development said.

RIL estimates that four smaller gas finds in the prolific KG-D6 block may contain 1-2 Trillion cubic feet of reserves and may help prolong peak output of 80 million standard cubic meters per day (mmscmd) from the block, sources said.

“These four finds were made in 2008 and RIL had at that time notified them as discoveries. They have now submitted ’Potential Commercialilty Interest’ which means that they can be exploited commercially,” a source said.

Once DGH approves commerciality, RIL will submit a detailed development plan, detailing investment and production potential.

RIL has so far made 25 oil and gas discoveries in KG-D6, of which two – D1 and D3, have been put on production at an investment of $ 8.836 billion. Besides D1 and D3 gas fields and MA oil discovery, nine other gas finds were previously declared commercial and now four more may be added to the list.

In 2008, RIL submitted plans to invest $ 5.91 billion in nine satellite finds but later pruned the list to just four considering government-fixed gas price of $ 4.20 per million British thermal unit did not justify such high additional investment.

The company on December 29 revised this to $ 1.5 billion spanning 0.6 Trillion cubic feet recoverable reserves in the four finds that could produce 10 mmscmd for 6 years.

The remaining five discoveries had been kept for developing at a later date, sources said adding these five and the four finds that are now in the process of being declared commercial may be clubbed together for development.

It will take 4-5 years to bring to production the four finds for which field development plan (FDP) has been submitted and the other finds may not come into production before 2016 by when D1 and D3 output would have hit decline phase.

The discoveries would be tied-up with Dhirubhai 1 and 3 (or D1 and D3) production facilities, which are designed to handle 80 mmscmd of output.

Sources said the mining licence for most of the 1.9 million acres of KG-DWN-98/3 or KG-D6 block has expired that it would need extension from the government to do additional exploration work.
The mining lisence expiry, however, may not impact the approved commercial finds which would be more governed by the field development plan approved by the DGH and the government.

Source:http://beta.thehindu.com/business/article392880.ece

India’s Reliance Industries has started drilling its fifth exploration well on the KG-V-D3 block off India. Drilling started on 2 April 2010 using the Transocean’s drillship Deepwater Expedition, partner Hardy Oil said in a statement.

The well aims to test Miocene and Pliocene sands and will be drilled to a target depth of 3514 metres. Three consecutive gas discoveries have been made in on D3: Dhirubhai-39, Dhirubhai-41 and Dhirubhai-44. Drilling on the fourth well, G1, was suspended due to limited rig availability but will resume at a later date, Hardy said.

The D3 block lies in the the Krishna Godavari basin off the east coast of India. The work commitment for the acreage includes the drilling of six exploration wells.

Reliance operates KG-V-D3 with a 90% interest. Hardy Oil holds the other 10%.

Source:http://www.upstreamonline.com/live/article211193.ece

Reliance Industries today said it is producing 63-64 million standard cubic meters per day of gas from KG-D6 fields, over 20 per cent less than the potential due to constraints in pipelines transporting the fuel to consumers.

“We have already tested facilities for producing (peak output of) 80 mmscmd (from eastern offshore KG-D6 fields) … we are however maintaining production at 63-64 mmscmd currently,” RIL Executive Director P M S Prasad told reporters here.

The company is forced to restrict output as state-owned gas utility GAIL’s pipelines in the west and north India do not have capacity to transport additional gas.

“There is pipeline constraint,” he said. GAIL hopes to complete expansion of its main trunk line HVJ this year after which more gas can be moved to consumers.

Prasad said RIL was currently producing about 21,000 barrels per day of oil from the D6 block and would need to drill 1-2 more wells to reach the peak output of 35,000 bpd.

Source: http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/Supply-contraints-restrict-KG-D6-gas-output-at-63-mmscmd-RIL/articleshow/5768102.cms

Natural gas from Reliance Industries’ prolific D6 field has generated savings worth thousands of crores of rupees for power and fertiliser companies, the main users of the gas.

Commercial production from the field in the Krishna Godavari (K-G) basin started on April 2 last year.

The gas-based power industry is estimated to have saved Rs 6,000 crore over the last year, while the government’s fertiliser subsidy bill is estimated to be lower by Rs 3,100 crore.

Users within the country could get gas from the D6 field, located off the Andhra cost, at a landed cost of $ 4.2 per million British thermal units (mBtu). This price was much lower than alternates like imported liquefied natural gas (LNG), the price of which touched over $20 per mbtu. It was, however, higher than the subsidised price at which the government sold gas to select customers.

NTPC, the country’s largest power producer, could reduce its pricey LNG imports as domestic gas became available. The power sector, the biggest consumer of K-G gas, was sold about 18 mscmd of gas, used across 4,745 Mw of power capacity.

According to industry experts, the cost of generating power from naphtha, assuming a naphtha price of $10 per mBtu, would be Rs 3.97 per unit, while the cost of generation from KG-D6 gas assuming a delivered price of $6 per mBtu would be Rs 2.50 a unit. “Depending on the current price of naptha (which is an alternative feedstock), the power sector is estimated to have saved about Rs 6,000 crore while using gas as feedstock,” said Rakesh Jain general manager (energy division) at Feedback Ventures.

These savings have gone to the pocket of the consumer, according to Jain, since most producers have agreements with the state power utilities to simply pass on the cost of fuel to the consumers.

The average saving to a household in Andhra Pradesh, a state which houses some of the plants to which the D6 gas has been allocated, would be as much as Rs 300 per month, according to industry experts.

This is assuming an annual power consumption of 2,448 kilowatt hour.

The fertiliser sector also benefitted, as it switched to gas.

“It has been a very good experience. The supplies have been stable, leading to smooth operations, and we did not use any naphtha (as fuel) in the past one year. The subsidy saving to government from our plant alone is around Rs 100 crore,” said Kapil Mehan, executive director, Tata Chemicals.

The company is using 0.88 million standard cubic metres a day (mscmd) of K-G gas at its fertiliser plant in Babrala (Uttar Pradesh). The total gas supply to fertiliser sector during 2009-10 was 12.24 mscmd, which translated to a production of 6.10 million tonne of urea.

The D6 field is currently producing 60 mscmd of gas.

The government, through its gas utilisation policy, has made allocations to various priority sectors like power, fertiliser, steel, city gas, refineries, petrochemicals, LPG and captive power.

The power sector has been allocated 31.165 mscmd of gas on a firm basis and another 12 mscmd of gas on fallback basis. The fertiliser sector has been given firm allocation of 15.508 mscmd, refineries have been given 5 mscmd of firm allocation and 6 mscmd of fallback allocation and the steel sector has been given 4.19 mscmd firm allocations.

A fallback allocation implies that the sector will get gas if the firm allocation of other sectors is not fully consumed due to some reason.

Source:http://www.business-standard.com/india/news/power-fertiliser-firms-reap-gains/390496/

State-owned Oil and Natural Gas Corp (ONGC) may have won a large oil block in Venezuela but the Petroleum Ministry wants Reliance Industries to join the project to give stability to the venture.
ONGC Videsh Ltd, the overseas investment arm of the state-run explorer, and Reliance had in 2008 teamed up to bid for the Venezuela’s Carabobo field auction but last year the Mukesh Ambani-run firm walked out sighting delays in the bid round. OVL subsequently roped in Spain’s Repsol YPF and Malaysian state Petronas to win Carabobo-1 heavy oilfield.

But since the project involves investments that may over the life of the project run into USD 40 billion, the Oil Ministry wants Reliance back into the project, sources in know of the development said.

Sources said fillers at very high level were sent to Reliance but it has so far remained non-committal on taking the state.

Reliance has, however, agreed to bail the state-run firms out agreeing to buy over one-fifth of the 400,000-480,000 barrels per day of oil production envisaged from the project.

OVL, Repsol and Petronas all have an 11 per cent stake each in the project, while Indian Oil Corp (IOC) and Oil India Ltd (OIL) have 3.5 per cent each. The remaining 60 per cent is held by Venezuela’s state Petroleos de Venezuela (PdV).

As per the bid conditions, the foreign firms, who were offered a maximum of 40 per cent stake in the project, had to commit to offtake the entire production.

Sources said of the planned output, Repsol had indicated it can take 165,000 barrels per day while Petronas said it could take 100,000 bpd. The remaining 220,000 bpd was split equally between OVL and OIL.

OVL’s share of 110,000 bpd would go to ONGC’s subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL), while Reliance agreed to take OIL’s share for at least 10 years from the start-up in 2016-17.

Source:http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/OilMin-wants-RIL-to-join-hands-with-ONGC-for-Venezuela-project/articleshow/5749798.cms