The first flow of oil from the D6 block of Reliance Industries Ltd’s (RIL) holdings in the Krishna-Godavari basin off the Kakinada coast in the Bay of Bengal has the potential to tilt India’s energy security in its favour. Although the field is finite with reserves of 10-12 years, the benefits during this period can go beyond merely ensuring continuance of supply.

It could take considerable strain off the economy. To put things into perspective, at its peak production of 5.5 lakh barrels of oil and gas per day, which is expected to be achieved in 18 months or so, the field will shave $20 billion off India’s energy import bill, over a quarter of its $77 billion estimation for the current fiscal year.

With the current uncertainty regarding the global market and the price of oil, the importance of the increase in self-sufficiency that a 40 per cent boost to India’s current hydrocarbon production would confer cannot be overstated. Given that the majority of the output will be natural gas the field is clear for a cheap, clean alternative for every aspect of energy use, from fuelling vehicles to lighting households and running kitchens. Swapping reliance on oil for gas also has the potential to put a substantial dent in the current petroleum subsidies the government must budget for.

Concurrently, however, the government must invest in parallel infrastructure upgrades. Once RIL begins sale to state-owned corporations, their power plants must have adequate capabilities to process this increased supply since natural gas cannot be stored. Likewise, given the price efficiency and environmental benefits of using CNG as a fuel source for vehicles, the current choke points at petrol stations supplying it must be cleared by expanding its availability.

For these benefits to be realised, the main roadblock currently facing RIL has to be resolved as swiftly as possible. An ominous note has been struck with the legal wrangles over the pricing of natural gas supply to Anil Ambani’s Reliance Natural Resources Ltd and the Bombay high court’s subsequent stay order on RIL sales. If this situation persists, the current January estimate for commercial gas production may prove to be a pipe dream. It would be a major loss to the country’s economy if the gas can’t start flowing because of a protracted legal battle.

Reliance Industries (RIL), India’s largest private company by sales, is gearing up to start production from the largest gas discovery in the world at Krishna-Godavari basin, within a few months.

Two weeks ago, RIL chief Mukesh Ambani instructed his senior executives to get ready for production by October, almost two-three months ahead of the earlier planned schedule, as the refinery at Jamnagar, the East-West pipeline and facilities at KG basin are nearing completion, said sources.

RIL is developing the largest gas find in the world in KG basin, with estimated gas reserves of 11.5 trillion cubic feet (TCF). The Mukesh Ambani-controlled RIL plans to initially produce about 40 million standard cubic meters per day (mmscmd) and raise it to peak output of 80 mmscmd in within another five to six months of starting production.

While the global average lead time from discovery to production is nine years in deep water gas findings, KG D6 will be the fastest deep water development project in the world in six years time, claimed an RIL source.

RIL is engaged in a high profile legal battle with Anil Ambani-promoted Reliance Natural Resources (RNRL) over gas supplies, based on a demerger pact between the Ambani brothers.

The Bombay High Court is yet to pronounce its decision. Sources close to both camps said they were not sure whether the dispute could be settled within a few months.

"More than 90 per cent of the field development works and that of the pipeline have been completed and production could begin within a few months. Though Reliance is targeting to start production latest by December, the internal deadline has been set as October," said an RIL executive.

RIL has not set any particular month or date to start production, as it is a huge project, commented a spokesperson.

About 15-20 contractors with experience in oil and gas production is associated with the field development plan, including the Indian engineering major L&T, which is constructing a large onshore gas terminal at Kakinada. Oil and gas expert Bechtel is in charge of the engineering, procurement, installation, and commissioning of the project.

The project consists of 22 subsea wells in deep water up to 1,200 meters, with the potential to expand to 50 wells. Most of the wells are 35 to 40 kilometers offshore from the east coast of Puducherry.

The 1,400-km 48-inch pipeline from Kakinada to Bharuch in Gujarat is also nearing completion, except for a small stretch near Chakan in Maharashtra.

RIL executives working with the pipeline said land acquisition issues related to this stretch have been resolved and RIL has started test-firing the pipeline in various stages. "Now we are using gas from SAIL to test fire the line," said the executive.

A few days ago, RIL chose AGR Group ASA, a Norwegian oil technology and services provider, for a three-year advisory services in its gas and oil field in Krishna Godavari (KG) basin. The contract with AGR Group ASA is worth about Rs 178 crore and AGR Group will provide services for the D-1and D-2 gas fields and D-26 oil find in the KG basin.

"We already have a strong presence in Subsea operations in the Asia Pacific region and we will bring this expertise to support Reliance on this project”, said Johan Moller Warmedal, CEO of AGR Asia Pacific.

Reliance Industries (RIL) has chosen the AGR Group, a Norwegian oil technology and services provider, for three-year advisory services in its gas and oil field in the Krishna-Godavari (KG) basin.

The contract with the AGR Group is worth about Rs 178 crore (AUD47 million) and the group will provide services for the D-1and D-2 gas fields and the D-26 block in the KG basin. RIL is developing the world’s largest gas field in the KG basin, with estimated reserves of 11.5 trillion cubic feet (tcf). Mukesh Ambani-controlled RIL initially plans to produce about 40 million standard cubic metres per day (mmscmd) and raise it to a peak output of 80 mmscmd within another five to six months after the production begins.

“We already have a strong presence in sub-sea operations in the Asia-Pacific region and we will bring this expertise to support Reliance in this project,” said Johan Moller Warmedal, the CEO of AGR Asia-Pacific.

“More than 90 per cent of the field development works and those of the pipeline have been completed and production could begin within a few months. Though Reliance is targeting to start production latest by December, the internal deadline has been set as October,” said an RIL executive.

About 15-20 contractors with experience in oil and gas production are associated with the field development plan. Engineering major L&T, one of the contractors, is constructing a large onshore gas terminal in Kakinada. Oil and gas expert Bechtel is in charge of engineering, procurement, installation and commissioning of the project.

The project consists of 22 sub-sea wells in deep waters up to 1,200 metres, with the potential to expand to 50 wells. Most of the wells are 35 to 40 km offshore from the east coast of Puducherry. While the global average lead time from discovery to production is nine years in deep-water gas finds, the KG D-6 will be the world’s fastest deep-water development project in six years, said an RIL source.

The 1,400-km, 48-inch pipeline from Kakinada in Andhra Pradesh to Bharuch in Gujarat is also nearing completion, except for a 1.5-km stretch in Sikhapur and another 20-km stretch in Varsi, Maharashtra.

RIL executives working on the pipeline said land acquisition issues related to the stretch have been resolved and the company has started test-firing the pipeline in various stages.

“Now, we are using gas from SAIL to test-fire the line,” said the executive.

RIL is spending above $5.3 billion on the gas field development plan and another $3.5 billion for the pipeline.