Addressing the media four days after oil gushed from the Dhirubhai 26 (D26) field, RIL chairman and managing director Mukesh Ambani said production would be ramped up to 5,50,000 barrels of oil equivalent (BOE) per day from 7,000 barrels a day now over the next 6-8 quarters.

Almost 85-90 per cent of this is expected to be gas, and the balance 10-15 per cent oil. To put things in perspective, the 5,50,000 BOE a day is almost 40 per cent of the total hydrocarbons production in the country. In value terms, it adds up to a staggering Rs 86,000 crore a year. According to Ambani, this will save $20 billion in precious foreign exchange for India that imports almost 70 per cent of its annual crude oil requirement. The country’s import bill is estimated to be $77 billion in the current fiscal, up 15 per cent compared with 2007-08.

“By 2009-10, the upstream or the E&P business will bring almost a quarter of the total profits for Reliance,” said Ambani, underscoring the significance of the discovery made in February 2006 and the company’s implementation skills in commercially exploiting it in less than 30 months. The contribution from E&P business to RIL’s profits is based on the current crude oil price of $100 a barrel and a gas price of $4.21 per mmbtu. “Over a period of time, E&P’s share is likely to be a third in RIL’s total profits,” he said.

RIL has already started commercial sales of the crude oil to refineries on the east coast including HPCL’s Vizag and IOC’s Chennai Petroleum. Currently, sales are done through spot contracts and once oil production reaches a peak of 40,000 barrels a day, RIL will enter into long term contracts with the refiners.

Gas production is expected to commence by January-March 2009, Ambani said. Initially, the output from the D1 and D3 discoveries will be around 15 mmscmd. It will reach a peak production of 40 mmscmd the next year and 80,000 mmscmd in the next 2-3 years. This will be equivalent to India’s current gas production of around 80-85 mmscmd.

Reliance owns 90 per cent of the D6 block and Canada’s Niko Resources has the balance 10 per cent. The company has already made 18 gas discoveries and one oil discovery from the block so far. The price of this gas has been fixed at $4.21 per mmbtu by the government for the next five years. While RIL will sell gas in line with the gas utilisation policy approved by a group of ministers, Ambani said India needed to chart out a roadmap for market-based pricing of gas — similar to that for oil — in the future.

Significantly, the sales of gas from the D6 block are subject to the Bombay High Court lifting a stay order. RIL’s head of oil and gas, PMS Prasad, said the company expects the country’s legal system to take a decision soon. “Someone has to decide whether we need to contain this $20 billion wealth by putting it back to the ground or we want it to fuel the assets, lying stranded and idle for want of gas. I am sure the Court will take a decision soon,” Prasad said. Sources indicated an out of court settlement with Reliance Natural Resources Ltd (RNRL), with which the court battle is on, is unlikely at this point.

Spurt in production

From 7,000 barrels a day at present, production at D6 would be ramped up to 5,50,000 barrels of oil equivalent (BOE) per day over the next 6-8 quarters. This is almost 40 per cent of the total hydrocarbons production in the country. In value terms, it adds up to Rs 86,000 crore a year

Plugging expences

Production from the field would save $20 billion in foreign exchange for India, which imports almost 70 per cent of its annual crude oil requirement. The country’s import bill is up 15 per cent compared with last fiscal

Who gets a tap

RIL has started commercial sales of crude oil to refineries on the east coast including HPCL’s Vizag and IOC’s Chennai Petroleum. Currently, sales are done through spot contracts. Once oil production reaches a peak of 40,000 bpd, RIL will enter long-term contracts with refiners

At what price

The price of gas has been fixed at $4.21 per mmbtu by the government for the next five years. While RIL will sell gas in line with the gas utilisation policy approved by a group of ministers, the company said India needed to chart out a roadmap for market-based pricing of gas – similar to oil – in the future

But wait

Sales of gas from the D6 block are subject to the Bombay High Court lifting a stay order. Sources indicated an out of court settlement with Reliance Natural Resources Ltd, with which the court battle is on, is unlikely at this point. RIL expects the country’s legal system to take a decision soon