Posts Tagged ‘ KG Basin ’

Contracts like Reliance’s KG-D6 are designed to benefit private players:

After the CAG, the high-level Ashok Chawla Committee has criticised the system of Production Sharing Contracts like the one Reliance Industries signed for the gas-rich KG-D6 block, saying these contracts are designed to benefit private players at the government’s expense.

Reliance bagged the KG-DWN-98/3 block in the first round of NELP, which was pioneered by the NDA government, and signed the PSC for the block in 2000.

The PSCs provides for the operator to recover all capital and operating expenditure become the government’s share of profit from a field rises to as high as 85 per cent. This system gives “incentive to (an operator to) increase his investment, or front-end his work plan” in order to see that the threshold where government’s profit take rises rapidly is not reached, the Chawla panel said in its report.

At the heart of the PSC lies the ‘investment multiple’, the ratio of net cash income to exploration and development costs. The investment multiple defines the share of profits that go to the government. The higher the expenditure, the lower the IM and hence, the government’s share of profit. Citing the example of KG-D6, the Chawla panel said, “The relationship between the pre-tax investment multiple (PTIM) and the share of contractor profit petroleum changes dramatically once the PTIM crosses 2.5, with the government’s share increasing from 28 per cent to 85 per cent.” “It is useful to remember that this schedule is bid by the operator and not determined by the government,” it said. “A high share of some PTIM will help to win the bid, depending on the financial model of evaluation used, but it does raise concerns that such a radical change would provide very strong incentives for any operator to adopt all investment and strategies possible to ensure that the PTIM stays within the 2.5 limit,” the panel report said. The CAG, in a draft report on its audit of the KG-D6 accounts, had also criticised the current PSC structure saying it was “unsuitable for protecting the government of India’s financial interests.

CAG saleuthes after prolonged examination could not find anything to substantiate their claim of Gold Plating of cost by Reliance Industries in the flag ship project of the Company.

2012
05/20
CATEGORY
Exploration
Oil & Gas
Reliance
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Reliance starts production in Krishna-Godavari basin

In a significant development, Reliance Industries has begun crude oil production from the nation’s first deep-sea oilfield in Krishna Godavari basin, an accomplishment that the firm may announce in the next few days.

The company’s predominantly gas-rich D6 block in Krishna Godavari basin on September 17 flowed first oil, said a source in the consortium of Reliance Industries and Niko Resources of Canada which operates the block.

Block KG-DWN-98/3 or D6 will be the first area in deep-sea to produce crude oil since India opened up its oil hunt programme for private and foreign players in 1999 with the advent of New Exploration Licensing Policy (NELP).

The Mukesh Ambani-led group operates India’s largest refinery at Jamnagar in Gujarat and will start production from another only for exports unit in next couple of month. It will however not refine the D6 crude at its refineries and instead sell it to state refiners.

Reliance, the source said, has initially opened one of the two oil producing wells in the MA oilfield in the D6 block. “Oil flowed at the rate of 200 barrels per day but once system stabilises, the choke will be fully opened to produce more.” Once both the wells are in full operation, the output will rise to 10,000 to 15,000 barrel per day within weeks. Two more wells are planned to be drilled on the field which would raise the output to 34,000 barrels per day (1.7 million tones a year).

Reliance is likely to sell 0.8 to 1 million tonnes of oil from the field to Hindustan Petroleum’s Vizag refinery while the remaining output will go to Chennai Refinery, a subsidiary of Indian Oil Corp.

The company earlier this week successfully installed a floating production storage and offloading system (FPSO) on the oilfield.

Reliance invested $2.234 billion in the MA oilfield that is estimated to hold 53.5 million barrels of reserves and will produce oil for 11 years – beginning with 20,000 bpd in first year and rising to 30,000 bpd in second year before beginning to decline.

Aker Smart-1 FPSO, contracted for $733 million, will help eliminate the need for piping the oil to the shore for onward transportation to refineries. Oil tankers can directly load at the FPSO and carry the oil to the destined refineries.

Reliance is separately investing $5.2 billion in phase-I of its gas field development plan, the first output of which is expected at least two months later than the first oil.

The firm has made 18 oil and gas discoveries in D6 and besides MA it is currently developing Dhirubhai 1 and 3 gas finds at an additional investment of $5.2 billion.

Initial gas output that may start now before November-end is seen at 15 million standard cubic meters per day and  going up to 40 mmscmd in three months.

Niko has 10 per cent stake in the 7,645 sq km KG-D6 block. Reliance is the operator with 90 per cent interest.The block was awarded to Reliance-Niko in India’s first international bid round in 1999.

Gas production from the Krishna-Godavri basin is expected to start in first quarter of 2009. The K-G basin will bring down India’s import bill by Rs.1,000 billion per year, Ambani said.

The gas will be sold at a base price of $4.2 per mmbtu (million British thermal unit) compared to the $2.02 quoted by the Oil and Natural Gas Corp (ONGC).

The utilisation of the gas is still embroiled in controversy, with RIL and younger brother Anil Ambani’s Reliance Natural Resources Ltd locked in litigation in the Bombay High Court over sharing of natural gas from the K-G basin.

 

Source : DNA, HIndu, NDTV

2008
09/21
CATEGORY
Uncategorized
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Reliance Industries: Refining blues

In the June 2008 quarter, RIL posted GRMs of $15.7 per barrel, which disappointed the Street which had pencilled in margins of $16-17 per barrel, given the sharp rise in crude oil prices. Refining contributes about 55 per cent to the company’s revenues which were Rs 1.37 lakh crore in FY08. Moreover, industry watchers believe there could be a slight delay in the output of gas from KG-D6 basin with it now being available only in November or even later.

Analysts say less than robust demand and fresh refining capacity coming into the market—much of it in Asia and the middle east– over the next couple of years, could cause refining margins to fall 20-25 per cent from FY 2008 levels.

Over one million barrels per day (bpd) of crude oil distillation capacity is estimated to come on stream in CY08 while twice that capacity is expected to be commissioned in the following year. GRMs, which were ruling at roughly $15 per barrel in FY08 could, therefore, come off to levels of around $12 per barrel by FY10.

Towards the end of August, Singapore refining margins had dropped sharply the result of a fall in the margins for diesel.

With the new refineries being complex in nature, the demand for middle distillates such as diesel and kerosene is likely to be met. However, margins for diesel could nonetheless remain higher than those for gasoline.

RIL’s petrochemicals business which brings just over 40 per cent of revenues is expected to do well with petrochemicals margins firming up in recent weeks. Also, the risks of the company being asked to pay a windfall tax appear to have receded.

RIL is expected to end FY09 with revenues of around Rs 1.9 lakh crore and a net profit of close to Rs19,000 crore.

BS Report

2008
09/12
CATEGORY
KG Basin
Market
Reliance
Stock Idea
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Reliance, divesting KG D6 Assets ?

Reliance Industries (RIL) has scrapped its plan to transfer 80% of its participatory interest in the famous D-6 block of the Krishna Godavari basin gas field, perhaps the company’s most valued asset, to four of its subsidiaries. The company had sent a letter to the petroleum ministry on Thursday (August 28) withdrawing its earlier application which sought permission to transfer the stake to the subsidiaries. Under the production sharing contract, any contractor (here RIL) is supposed to get the government’s nod for transferring stake in any asset.

In the letter, RIL says that it has organised funds required for the exploration and production of the block, officially known as KG-DWN-98/3, and therefore wants to abandon its plan to transfer its participatory interest to the subsidiaries.

In its application to the ministry for the proposed transfer three months ago, it had said the move was aimed at increasing flexibility in organising finances for the development of the project. RIL’s investment in the KG basin blocks is expected to be around $8 billion. Interestingly, RIL, had got the go-ahead from the Directorate General of Hydrocarbon on this on August 21. The proposal had then been forwarded to the petroleum ministry.

When contacted, a RIL spokesperson confirmed the development. “RIL has raised the requisite financial resources and is no longer pursuing the application for assignment of participating Interest (PI) to the subsidiaries. Implementation of the project has not been hindered,” the spokesperson said.

“However, in view of non-receipt of such approval/confirmation, we have successfully firmed up alternate means of financing and have met the cash requirements of the project…. We are entitled to assign the PI as envisaged in the…PSC but having raised the requisite finance as aforesaid, there is no need at this time for us to pursue the means of financing that would envisage assignment of PI and for the record hereby formally withdraw the..application and request that no further action need be taken thereon,” RIL said in its letter addressed to the joint secretary (exploration) in the ministry of petroleum. ET has a copy of the latter.

Industry experts said RIL’s move could have been partly driven by the criticism of its big shareholders. A few major shareholders, especially the foreign institutional shareholders, had questioned the logic of the proposed move in the past few days after the development came to the fore on Tuesday.

RIL clarified the next day that these four companies, Reliance KG Exploration and development, Reliance KG D6 E&P, Reliance KG Basin and Reliance E&P KG, are wholly-owned arms. But there were reports saying at least one of these companies could be part-owned by two top-level RIL executives.

The timing of RIL’s withdrawal from the proposed move assumes significance. RIL has withdrawn the transfer of the participatory interest on Thursday (August 28), four days before the hearing of the legal case between the company and Anil Ambani’s Reliance Natural Resources (RNRL) in the Bombay High Court.

Source : ET, INfraline

2008
09/01
CATEGORY
Exploration
KG Basin
Oil & Gas
Reliance
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RIL to start crude production from KG basin next month

With a FPSO (Floating, Production, Storage and Offloading) vessel set to stream into Kakinada from Singapore shortly , Reliance Industries Ltd is gearing up to extract crude from its Krishna Godavari basin wells by the second half of September.

The MA Fields in the D-6 block in the KG basin will produce about 40,000 barrels a day. The crude evacuated through pipeline grid set up will be shipped through tankers to refineries, according to RIL officials.

However, the gas produced from the KG wells will be pumped back into the wells as there is no possibility to store the gas. Meanwhile, the onshore gas processing facility at Gadimoga is nearing completion. “After the FPSO moves to Kakinada shores from Singapore, within a couple of weeks we expect production to commence from these wells. Initially, it could be about 15,000 barrels a day to be gradually ramped up to 40,000 barrels a day,” the official explained.

Asked about the gas production in the KG basin (Doubling India’s Gas Supply ny 2010), the official said that most of the installations and pipeline work of 1,400 km from Kakinada to Bharuch had been completed barring small link-ups.  

The undersea equipment has been procured. It is likely that by the fourth quarter of this year, the gas wells will be ready for production,Dhirubhai-I, the floating oil production unit chartered by Reliance, has been built by converting a large tanker in Singapore.

According to information reaching here from Singapore, the floating unit left Jurong yard last Wednesday and is scheduled to arrive at the eastern coast of India by Friday.

The floating oil unit is on a 10-year charter from the Norwegian company Aker and the initial contract value was $750 million. Aker will also operate and maintain the FPSO under a separate five-year contract.

Once the FPSO is anchored and connected to the oil wells, which is expected to take at least two weeks, oil production from a developed field can commence within a month, said an oil industry expert.

Unlike normal tankers, which need dry-docking at least every two years, the FPSO is designed to operate for 10 years without dry-docking.

Dhirubhai-I can process 60,000 barrels of oil and 15 million cu m of gas a day and can store 1.3 million barrels of oil.

The 8.86 lakh dwt tanker –S.T.Polar – was originally built in the US. The refitting at the Singapore yard is expected to extend the 25-year-old vessel’s life by 15 years.

As reported In Business Line 

2008
08/15
CATEGORY
Exploration
KG Basin
Oil & Gas
Reliance
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KG Basin: Doubling India’s Gas Supply by 2010

India, Asia’s third-largest oil consumer, is encouraging use of natural gas to control its oil import bill and rein in inflation but there is not enough supply to satisfy rising demand. Gas demand in India, at around 179 million standard cubic meters a day, is far short of the supply of about 95 mmscmd (including LNG).

Supplies are expected to double by 2010 when KG-D6 reaches peak of 80 mmscmd and flow of additional LNG (read production from RIL K- G Basin blocks) . However, by them demand projections made by Petroleum Ministry see the need for about 230 mmscmd of gas.

K-G Basin Estimated Reserves:The Directorate General of Hydrocarbons, the oil and gas regulator, had earlier said gas reserves in the block amount to 1.38 tcf. Reliance Industries’ block, one of the largest discoveries in the country, in the same basin has reserves of 11.3 tcf.

Patel also said GSPC had booked a capacity of 10 million cubic metres per day (mcmd) in the gas pipeline that Reliance Industries is laying to transport its oil from Andhra Pradesh to Gujarat.

On Shore Terminal at Kakinada: Modi added that 300 acres had been acquired in Kakinada, Andhra Pradesh, to build an onshore gas processing terminal.

GSPC has drawn a master-plan at a cost of Rs 8,000 crore for setting up city gas distribution projects in 40 cities in Gujarat, the company said in a statement recently.

Source: BS, Hindu

2008
07/18
CATEGORY
Exploration
GSPC
KG Basin
Oil & Gas
Reliance
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Oil & Gas Market, India

Reliance Industries (RIL), which is set to kick off the first spot crude oil market in the country, will be inviting price quotes from oil refining companies shortly.

This would also set the first benchmark for market-driven prices in the crude oil sector. RIL is set to be the first oil and gas private major to develop an oil and gas market in the country. RIL has had initial round of talks with refinery companies such as Hindustan Petroleum Corp for its Vizag refinery, Mangalore Refinery & Petrochemicals and Chennai Petroleum Corp, to name a few.

RIL would float the tender in a few days when the company would set an indicative benchmarked price based on the quality of the crude. Initial tests have shown the crude to be sweet and light in nature, which is a premium crude. Refinery companies bidding for the crude oil will have to quote a price that is a discount or a premium to the indicative price. Although a final decision is yet to be taken, RIL — which has two refineries, including the one being developed by Reliance Petroleum — will not bid for the crude. “This is aimed at keeping the price discovery process as fair and transparent as possible,” a source said.

MA field Development :

The company, which bagged several blocks under the bidding rounds of the new exploration and licensing policy (Nelp), made the biggest gas find in 2002. The company is planning to produce 40,000 barrels of oil from the MA field, which is a part of RIL’s D6 block.

It is learnt that RIL recently submitted commercial details of MA’s crude to the petroleum ministry. Oil ministry had asked the operator to submit crude lifting procedure and crude sales agreement between the contractor and buyers. According to the production-signing contract (PSC), RIL is expected to submit the same six months prior to commencement of production from the field,” the source said.

The government has approved $2.2-billion field development plan (FDP) of the MA field, an oil ministry official said. “The management committee constituted under the PSC, consisting of contractors (RIL-Niko) and government nominees, had approved the FDP of MA field (Dhirubhai-26) within the contract area of KG-DWN-98/3 (KG-D6) located in the deep waters of Krishna-Godavari (KG) basin off the east coast of Andhra Pradesh in April 2008,” an RIL source said.

According to RIL sources, in the Cretaceous section of D6 Block, the MA-2 well encountered the thickest hydrocarbon column discovered to date in D6. MA-2 reached a depth of 3,581 m and penetrated a gross hydrocarbon column of 194 m consisting of 170 m of gas/condensate (53º API) and 24 m of oil (42-43º API). MA-2 is located 2 km from the MA-1 discovery well. Fast-track development of KG-D6 MA Cretaceous oil discovery has been planned for production to be onstream during 2008. The commerciality of MA oil discovery was approved by the directorate general of hydrocarbons (DGH) on February 1, 2007. 
The field was discovered by RIL in 2006 and a development plan was submitted to DGH and other management committee members for approval. The development plan includes production through a floating production storage & offloading (FPSO) platform (see also : FPSO on MA Field ) The field’s peak oil production is estimated at 40,000 BOPD and an estimated gas of 240-350 MMSCFD.

“The production is likely to commence in the second half of 2008, and this will be the first deep-water production by a domestic company. The MA oilfield development plan is in addition to the development plan for gasfields D1-D3 within the same block,” RIL claimed in a statement.

RIL acquired the block KG-DWN-98/3 under Nelp-I. Niko (Neco) holds 10% participating interest in the block.

 Source : Economics Times, DGH, Media Reports

2008
05/27
CATEGORY
NELP
Oil & Gas
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Reliance : FPSO on MA field

Reliance Industries has awarded a FPSO contract to Aker Floating Production. Aker Borgestad Operations will be in charge of operations and maintenance of the floating production, storage, and offloading vessel (FPSO) Aker Smart 1 at India’s MA field.The value of the five-year project is just over USD 100 million. The Reliance includes options to extend the contract period.

In May 2007, Aker Floating Production entered into a contract in excess of USD 750 million contract with Reliance for chartering of the Aker Smart 1 FPSO. The new contract with Aker Borgestad Operations expands the initial scope of work with Reliance to cover FPSO operations and maintenance. Under the contract, Aker Borgestad Operations will be in charge of both technical operations and FPSO operations for the production of oil, gas, and condensate from the MA field.

Aker Smart 1 will be deployed at the MA field, which is located at water depths of 1,000-1,400 meters, some 60 kilometers offshore eastern India. Production start-up will take place in two phases: oil production is scheduled for April 2008, and gas production will begin in the fall of 2008.

Word of Advice:

One more boost to the booming bootomline of RIL, this along with the likely production of Gas from KG basin in April- June  08 will boost the RIL revenue in the years to come.

 Source : Oil & Gas

2007
12/20
CATEGORY
Market
Oil & Gas
Reliance
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