KGBasin

India recorded the highest rise in natural gas output worldwide in 2009 after Reliance Industries’ eastern offshore KG-D6 field came into production, Economist Christof Ruhl said.

Mukesh Ambani-run RIL began gas production from the Krishna-Godavari basin in April, 2009, and its 60 million standard cubic metres per day output led to a 75 per cent jump in natural gas availability in the country to 140 mmscmd.

“Last year, India had the highest increase in production of natural gas worldwide. And I just checked, it also had the highest corresponding increase in consumption in natural gas worldwide,” BP Plc Group Chief Economist Christof Ruhl said. The jump in natural gas production in India was possible because the government allowed private sector firms to take a lead in exploration for hydrocarbons.

“When you look at countries where gas production is heavily government-controlled, like Russia, they had the biggest decline in gas production and consumption,” he said. “When you look at countries where new technologies have been developed like unconventional shale gas in the US… it was because they have an investment environment which is very competitive,” he said. Shale gas, trapped in sedimentary rocks, is said to hold the potential of doubling gas output in US.

Ruhl said that it was very clear who was left behind, as countries where natural resources were tightly controlled were less flexible.

Source: Economic Times

Reliance Industries Limited (RIL) announced its fifth oil discovery in exploration block CB-ONN-2003/1 (CB 10 A&B), awarded under the NELP-Vround of bidding. The block CB-ONN-2003/1 is located at a distance of about 130 kms from Ahmedabad, Gujarat, in the Cambay basin. The block, in which Reliance holds 100% participating interest, covers an area of 635 square kilometres, the company said. The discovery is significant as this play fairway is expected to open more oil pool areas, leading to better hydrocarbon potential within the block.

RIL drilled the well CB10A-J1 to a total depth of 1957 metres in Part A of the block, with the objective of exploring the play fairway in the Miocene Basal Sand (MBS) of Babaguru formation and Eocence Pays of Kalol formation. Hydrocarbon bearing zone was identified at a depth of 1376-1385.5 metres in the Miocene Basal Sand (MBS) of Babaguru formation.

Conventional production testing was carried out in the interval of 1376-1381.5 m. The well flowed at a rate of 255 barrels of oil per day (bopd), through a 6-mm bean with a flowing tube head pressure of 180 psi. The discovery is significant as this play fairway is expected to open more oil pool areas, leading to better hydrocarbon potential within the block. The block covers an area of 635-sq km in two parts viz., Part A & Part B. RIL, as Operator, holds 100% Participating Interest (PI) in the block. While the entire block was covered with 2D seismic, nearly 80% of the block area also has 3D seismic coverage. Of the fifteen (15) exploratory wells drilled in the block by RIL so far, 11 are located in Part-A and the remaining 4 in the Part B of the block.

RIL is continuing further exploratory drilling efforts in the block. This discovery, named ‘Dhirubhai–48’, the fifth oil discovery in the block so far, has been notified to the Government of India and to the Director General of the Directorate General of Hydrocarbons. The potential commercial interest of the discovery is being ascertained through more data gathering and analysis. This discovery supplements RIL’s understanding of the petroleum system in the Cambay basin in general and the block in particular. Based on interpretation of the acquired 3D seismic campaign in the contract area, RIL has identified several more prospects at different stratigraphic levels with upside potential.

Source:http://news-views.in/reliance-industries-gas-in-cambay-basin/

Energy major Reliance Industries and Reliance Natural Resources Ltd will reach a gas supply agreement in the next two weeks, taking forward a patch-up between the billionaire Ambani brothers the Economic Times reported on Thursday.

The agreement, being negotiated between officials of the two companies, aims for Mukesh Ambani-controlled Reliance Industries to supply gas for 10 years from 2012 to power plants run by his younger brother Anil, the newspaper said, without saying where it got the information from.

After five years of a bitter feud that split India’s richest family, the brothers had unexpectedly called a truce on Sunday by ending a non-competition agreement that was a source of acrimony between them.

Earlier this month Anil lost a Supreme Court battle with Mukesh in a gas pricing dispute, with the court ordering the brothers to renegotiate within six weeks a private natural gas supply contract and gave the government control over setting gas prices.

The Economic Times said there was a possibility that Reliance Industries may pick up significant minority stakes in gas-based power plants owned by Anil Ambani’s group.

A spokesman for Reliance Industries said he had no comment on the report, while Anil Dhirubhai Ambani Group could not be immediately reached.

Source:http://news-views.in/ambanis-to-reach-gas-deal-in-2-weeks/

India’s top auditor CAG has said that audit of the D-6 oil block in the Krishna-Godavari basin operated by Reliance Industries is likely to take 4-5 months more to be finished.

“We require 4-5 months to complete the audit… The process would take time, as this is the first time that we are looking at a private player’s books… It’s a very detailed process”, Comptroller and Auditor General Vinod Rai said.

The CAG is auditing Rs 45,000 crore capital spending by RIL, which is controlled by Mukesh Ambani, to tap natural gas from the D-6 block in K-G basin, following a request from the petroleum ministry in 2007.

He said that RIL had submitted all related documents sought by CAG by the end of January this year.

“All the firms, including RIL, have submitted required documents that we have sought,” said Rai.

However, a Reliance Industries spokesperson refused to offer any comment on the issue.

In a hard-pitched battle last year between the Ambani siblings, younger brother Anil Ambani had alleged that Mukesh-controlled RIL had inflated capital spending to Rs 45,000 crore from the initial estimate of Rs 12,500 crore for the D-6 block.

CAG’s scope of audit is in respect of the block KG-DWN-98/3 (KG-D6) awarded to RIL for two financial years — 2006-07 and 2007-08 — with access to records of previous years linked to transactions in these years.

It is also understood that the scope of this audit will far exceed the normal course of audit by the CAG and the prime objective may be to detect fraud, if any, by the operator (RIL), allegedly in collusion with oil regulator DGH and the Ministry of Petroleum and Natural Gas.

In 2007, the Petroleum Ministry had asked the CAG to conduct an audit of seven oil and gas blocks, including RIL’s KG-D6 block. After initial reluctance, the CAG is now conducting the audit of four oil & gas blocks, namely KG-D6 of RIL, the Barmer and Ravva oilfields being operated by Cairn India and the Panna-Mukta-Ta.

Source:http://www.hindustantimes.com/RIL-s-K-G-basin-audit-to-take-4-5-months-to-complete-CAG/Article1-544355.aspx

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