KGBasin

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

Union Petroleum Secretary S Sundareshan on Saturday said that south India will start getting natural gas from the Krishna-Godavari basin from 2012.

The Ministry of Petroleum and Natural Gas had called for a meeting of Reliance Industries Ltd (which owns the gas fields) and Gas Authority of India Ltd (which lays pipelines) about ten days ago and told them to implement the project in a “strict timeframe”.

Reliance has been authorised by the government to lay a pipeline from Kakinada to Chennai and this pipeline would further extend to Tuticorin. Reliance would also lay a pipeline between Chennai and Bangalore, he told a press conference here.

The gas would start flowing to Tamil Nadu anytime between March 2012 and the end of that year, he said. There would be connectivity to Madras Fertilisers Ltd and SPIC, he said, referring to the two fertiliser companies, whose operations are suffering for want of natural gas.

On the issue of pricing of petroleum products, he said, “It is not possible to insulate consumers continuously from the volatile international crude price and the government has to take a hard decision in the future.”

At present, subsidy component for petrol is Rs.5 per litre, for diesel Rs. 3, for kerosene Rs. 16 and for LPG Rs. 260 a cylinder. Due to under-pricing the government had incurred an expenditure of Rs.45,000 crore in the current financial year.

Poor people were forced to pay for supplying subsidised petrol and petroleum products to those who were affluent.

The Secretary said oil marketing companies were fully geared to meet the increasing demand for petroleum products, which had been going up at 15 per cent per annum for petrol, 8 to 9 per cent for diesel, and 10 per cent for LPG. In Tamil Nadu, there had been a 10 per cent increase of LPG consumers every year. The State had achieved a coverage of 75 per cent in respect of LPG supply, which might increase to 83 per cent in the next four or five years.

There was no shortage of LPG in the State and new connections were being released to prospective consumers without any waiting list and efforts were being made to supply refills expeditiously.

Source:http://www.hindu.com/2010/03/21/stories/2010032159130100.htm

Reliance Industries-operated D6 gas field in the Krishna-Godavari (KG) basin has produced more than 10 bn cubic meters of natural gas worth over $1.5 bn in the first 10 months, a senior official in the oil ministry said. RIL commenced gas production from its KG-D6 on April 2, 2009.

Oil minister Murli Deora confirmed that the ministry has reviewed gas production from KG-D6. “It is a major achievement in country’s energy security. The (gas) production has helped industries particularly power and fertiliser sectors,” he told ET.

As per an oil ministry’s note, about 22 million standard cubic meter per day (MMSCMD) gas from KG-D6 is supplied to power units. “This has helped in generating an additional 5,000 MW power. It not only reduced the cost of producing power but also revived four stranded power plants in Andhra Pradesh,” the official said requesting anonymity.

“Now most of these power plants (getting KG-D6 gas) are running on a 90% plant load factor (PLF),” he added. PLF is measurement of average capacity utilisation of a power plant. Earlier, PLF of these power units was around 60%.

Due to the KG-D6 gas, government has been able to save subsidies on urea production to the tune of about Rs 4,000 crore, he said.

RIL is currently producing about 60 MMSCMD gas from KG-D6. “It is an achievement that the company has ramped up gas production in such a short time. It is only 20 MMSCMD less than achieving peak production level of 80 MMSCMS,” he said. At present production is taking place in 16 wells. But all 18 wells of KG-D6 are ready to commence production.

Reliance has already signed gas sale purchase agreements (GSPAs) with 48 customers for supplying over 61 MMSCMD. Consumers are specified by an empowered group of ministers (EGoM), and they are from fertilisers, power, city gas distribution, steel, LPG, refinery and petrochemical sectors.

In December 2009, RIL successfully tested the design capacity of its KG-D6 deepwater gas production facilities which gave a flow rate of 80 MMSCMD. RIL has been able to produce first gas from its KG-D6 block in a record time of six and a half year. Normally, deepwater production of such scale takes 9–10 years time. The KG-D6 gas field is one of the top five largest deepwater gas projects globally.

Source:http://economictimes.indiatimes.com/articleshow/5601365.cms

KG D-6’s gas has affected the LNG’s spot market. Power and Fertilizer companies have diverted their attention towards KG D-6 for the gas supply. In last one month, in Hazira and Dahej terminals, not even a single cargo of LNG spot cargo has been arrived.

The spot market of Liquid Natural Gas (LNG) is shrinking. This could well be estimated from the fact that the business has faced beating in last one month at the Hazira LNG terminal of Shell and Dahej terminal of Petronet LNG. KG D-6’s gas has affected the LNG’s spot market to a great extent during the recent times. Reliance Industries’ (RIL) prolific KG D-6 is now producing 60 million standard cubic metre of natural gas every day (mmscmd) and has almost replaced the spot LNG demand in the country.

Most of the power and fertilizer companies have diverted their attention from the spot market of LNG to KG D-6. Supply of KG D-6 gas has largely replaced the demand of spot LNG. This is evident from the fact that before the allocation of KG D-6 gas, RIL itself was consuming almost 4 cargoes of LNG every month. According to the government sources, in last one month, in Hazira and Dahej terminals, not even a single cargo of LNG spot cargo has come.

Chief Executive Officer and Managing Director of Petronet Mr P Dasgupta said, “Today no one is making any LNG’s spot deal, the last LNG spot cargo was arrived in November 2009. The demand can only be there with advent of new energy and fertlizer companies. The present demand for the gas is being met by KG D-6 gas and the long term gas demand is being met by import of LNG by Petronet.”

According to the sources the future price of LNG is close to $8.2 per mmbtu, while KG D-6 gas is available at $4.20 per mmbtu. Till December last year even RIL was buying spot LNG from Hazira, every month for its Jamnagar Refinery. After it was allotted KG D-6 gas, no one is buying at spot LNG from Hazira. One of the officers of Shell India, also confirmed low spot LNG business, however, he refused to shares the figures.

Prior to KG D-6 gas supply, total gas supply in the country was staggering at around 110 mmscmd, including the long-term LNG sourced by PLL and Shell, as against the demand of about 175 mmscmd. Remaining gas demand was met through spot LNG. With the production of 60 mmscmd gas from KG D-6 field, the present demand of gas in the country is satisfied. However, the gas demand in the future is likely to rise again in the coming years as the domestic supply is unexpected to match the pace of growing energy demand of the nation.

Source:http://oilandgasindia.blogspot.com/2010/02/kg-d-6-gas-fast-replacing-spot-lng.html

Reliance Industries Ltd (RIL) is yet to take a final decision on roping in a new partner for the Haryana SEZ coming up in Gurgaon and Jhajjar. While speculations are on that the company is in talks with Infrastructure Leasing & Financial Services (IL&FS) and the modalities are being worked out, sources in Haryana State Infrastructure and Industrial Development Corporation (HSIIDC), the joint venture partner in Reliance Haryana SEZ, informed FE that so far the corporation has not received any formal notice fromRIL about the issue.

“Things are likely to be clear once RIL takes a final call on the issue and inform us about the development. After that the steering committee meeting will be held and decision will be taken about the ownership share and other things,” said a senior HSIIDC official.

However, RIL, while accepting that plans are on to engage a strategic partner, maintained silence about the name. Reliance Industries spokesperson said, “The company plans to engage a strategic business associate to maximise the potential of the investments made so far and make the SEZ a truly global investment destination.”

“We have about 10,000 acres of land in possession in two districts and are currently focusing on getting requisite permissions, statutory approvals and clearances, transfer of legal titles, contiguity and financial closure to start the operation. The company has so far invested over Rs 3,000 crore in the project. The project is envisaged to be developed as a fully integrated Industrial Township to attract global and domestic investments.” he added.

The HSIIDC official further said that the company has approached the corporation for acquiring about 1,700 acres of land in Jhajjar for maintaining contiguity. “We have also recommended that Reliance SEZ be developed as a nod under the Delhi-Mumbai Industrial Corridor project. It will facilitate better industrial development within the SEZ,” he said.

Reliance has also filed for seeking a fresh in-principal approval for its Gurgaon SEZ, after the Centre refused to extend the same in December last year, as SEZ rules don’t permit giving third extensions. The approval is yet to come from the Centre.

The Inter-ministerial Board of Approval (BoA) had asked RIL and ten other developers to apply afresh along with respective state governments’ recommendations.

Reliance Haryana SEZ was granted the in-principle approval in March 2006 and the proposals were valid till March 2009 after two extensions.

Source:http://www.financialexpress.com/news/RIL-yet-to-rope-in-partner-for-Gurgaon–Jhajjar-SEZ/574165/

“Reliance Group is increasing sales in the domestic market to meet higher demand,” said James Williams, an economist at energy research firm WTRG Economics in London, Arkansas. “Exports aren’t that profitable since demand in OECD countries is weak.”

The Paris-based Organization for Economic Cooperation and Development represents most of the world’s high-income economies such as the U.S., Japan and Germany.

The Mumbai-based energy explorer and refiner sold 20.65 million metric tons of fuels in India in the nine months ended Dec. 31, up from 8.01 million tons a year earlier, according to Bloomberg calculations based on export figures released by the company.

Reliance, India’s biggest non-state company, started an export-oriented 580,000-barrel-a-day refinery in December 2008. It’s next to an older plant that can process 660,000 barrels a day. Together, they make up the largest refining complex in the world, according to Reliance.

Reliance in 2009 became one of the top 10 charterers of Aframax tankers to ship petroleum products, according to a report released by Poten & Partners, a shipbroker. Aframaxes can carry 637,500 to 1.02 million barrels of fuels.

Source:http://www.bloomberg.com/apps/news?pid=20601091&sid=ann1GXXxXhuw

The world’s largest refining hub could just get even bigger. The second refinery, set up by Reliance Industries Ltd (RIL) at its Jamnagar complex in Gujarat, has already overtaken the older, adjacent refinery in production volumes and could go even further–exceeding its design capacity by at least 20 percent, according to four persons familiar with the development.

The second refinery, which was commissioned by RIL in end-December 2008 to process 580,000 barrels per day (bpd), started full-scale commercial production early this fiscal. It operated at 115 percent of its stated capacity in the October-December quarter, according to the firm’s 22 January statement.

At this rate, the refinery could refine 667,000 bpd, overtaking RIL’s older Jamnagar refinery, which can process 660,000 bpd. Put together, it’s the largest refining operation globally at a single location.

At least two firm officials familiar with the matter and two sector analysts confirmed that the new refinery had the “elbow room” to boost capacity up to 700,000 barrels of crude of oil a day or a fifth more than its nameplate capacity. Although this comes at a time when most sector analysts are forecasting a subdued outlook for the refining and petrochemical segments, they are less worried about the impact an extra dump of refined fuels could have on the oil-and-yarn conglomerate. Other refiners will lose out not RIL, they said.

“Right from the time the design plan for this refinery was announced, a section of the market believed that the capacity will eventually be higher than announced. It happened with the previous refinery too,” said Mumbai-based brokerage Angel Broking Ltd’s analyst Deepak Pareek. He estimates that RIL’s profit before tax could swell by as much as Rs750 crore if the new refinery operated at 120 percent of its stated capacity.

A questionnaire emailed to the RIL spokesperson on Friday remained unanswered till press time. A firm executive explained that when all the parameters in a refinery–such as the crude mix, pressure, heat catalysts and other operating conditions–are at optimum levels, then it can process more than its design capacity through “debottlenecking”, “especially if some elbow room is built into it”. The executive, who did not want to be identified, added that this happened in other places as well, such as fertilizer plants.

Apart from a possible increase in refining, RIL is also undertaking steps to boost storage. International news agency Reuters had reported on 28 January that RIL had leased capacities to store petrol at the Borco oil terminal in the Caribbean, as it eyes the US market and those to its south. The deal on the 500,000 barrels storage facility was secured sometime towards the end of last year, it had said.

“All refineries and plants when they are designed and contracted out, are supposed to run at a certain capacity. To keep it steady at that level, usually a 10-15 percent higher capacity is built into it as a buffer,” said a sector analyst with the Indian arm of a foreign brokerage who, along with his counterpart in another brokerage firm, confirmed that the Mukesh Ambani-owned firm had indicated successfully “stress testing” the new refinery up to 700,000-710,000 barrels of crude a day. The refinery seems to have stabilized faster and achieved higher performance sooner than the street expected. Stress testing helps to determine the stability of a given system and involves testing it beyond the normal operational capacity, often to a breaking point, in order to observe the results.

This analyst, who did not want to be named as he doesn’t officially speak to the media, said the previous refinery too had undertaken the same route and went from a stated capacity of 27 million tonnes to 33 million tonnes– an increase of about 22 percent.

“This higher capacity will be a very low cost expansion,” pointed out Pareek. Concurred the other analyst: “This will go straight to the profits since no capital expenditure is incurred. And this extra capacity is an option RIL can choose to exercise or not. It gives flexibility.” Analysts pointed out that additional supply might depress the product prices but refined fuels are ultimately a commodity with existing demand. This means, if RIL produces more, it may edge out less efficient suppliers.

RIL beat street estimates in the December quarter earnings, clocking higher refining margins–or earnings from turning crude oil into a number of fuels–of $5.9 (around Rs274) per barrel and much of it on account of the higher utilization of the new refinery. The firm doesn’t report margins for the two refineries separately and hence, one cannot delineate its efficiency from the overall performance. The firm had reported a $4 per barrel premium over Singapore gross refining margins, the Asian benchmark, marking a rebound after eight quarters in which RIL saw its lead over peers eroding.

RIL’s chief financial officer Alok Agarwal told reporters after the latest quarterly results that he was “confident” the refining margins will improve in 2010. The new refinery could be of help here.

Source:http://www.livemint.com/2010/01/31220652/RIL8217s-new-Jamnagar-unit.html