On 17 September, Reliance industries created history when it pumped oil from India's first deep-sea oilfield. Initially oil flowed at 5500 barrels per day; this is expected to rise to 20,000 bpd in less than a month. The peak output of 40,000 bpd will be achieved by 2010.

RIL's chairman and managing director Mukesh Ambani and his wife Nita Ambani received the first consignment oil from the predominantly gas rich KG-DWN-98/3 or D6 block in Krishna Godavari basin off the east coast.

India's domestic crude production has been stagnant at about 680,000 bpd for almost a decade now even though consumption has grown multifold. The result: the nation relies heavily on imported oil to meet its growing energy needs. The nation imports roughly 78 per cent of its oil needs.

To reduce import dependency, India in 1999 introduced in the revolutionary New Exploration Licensing Policy that invited private and foreign players to augment efforts of oil exploration and production.

Large gas output from 2009...

Reliance won the D6 block in the very first round and made the world's largest gas discovery of 2002 in the area. After a series of gas finds that were named after the Group's founder Dhirubhai Ambani, Reliance in 2006 discovered oil. This time too, the find was named after Mukesh Ambani, the elder of the two sons of Dhirubhai. The oilfield is now known as MA, the short of Mukesh Ambani.

The light and sweet crude (low sulphur) oil that is being benchmarked to Tapis and Nigerian Bonny Light crude oils, is initially being sold on spot prices to) Hindustan Petroleum Corp Ltd's Vizag refinery. The company will enter into annual contracts once output reaches the peak 40,000 bpd.

Reliance will, however, begin gas production from Dhirubhai-1 and 3 fields, the first two of the 18 gas discoveries the company has made in D6, in January 2009, company President and CEO (Oil and Gas) PMS Prasad said.

The company plans to pump 89 million standard cubic meters per day of natural gas from 2010 to almost double availability of gas in the country.

"From these two fields, gas production will reach 80 mmscmd in next 6-8 quarters," he said. Another 9 mmscmd gas would be produced from the MA oil field.

Investment of over Rs 40,000 crore...

Reliance is investing $5.2 billion in developing Dhirubhai-1 and 3 discoveries that will start producing 15-20 mmscmnd gas in Q1 2009 and 40 mmscmd by mid-2009. This level of investment would give peak output for 2-3 years and the firm would invest another 3.5 billion to keep output from the two fields a plateau for 7-8 years.

"Life of the field10-12 years.”

The firm has submitted development plan for eight other finds adjoining Dhirubhai-1 and 3, to the oil regulator for approval. This would entail an additional $6 billion of investments to produce an additional 25 mmscmd.

The company has invested $2.234 billion in developing the MA oil- fields. Oil reserves in the block are estimated at 53.5 million barrels and production will last 11 years - beginning with 20,000 bpd in first year and rising to 40,000 bpd in second year before beginning to decline.

Direct loading into ships

Reliance is using Aker Smart-1 floating production storage and offloading system (FPSO) for oil production. The 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 the operator and holds 90 per cent stake in the 7,645 square kilometre D6 block. Canada's Niko Resources has the remaining 10 per cent interest.

The Mukesh Ambani-led group operates India's largest refinery at Jamnagar on the west coast and would commence production from another only-for-exports-unit in next few weeks. It will, however, not refine the D6 crude at its refineries and instead would sell it to state refiners.

However, all is not hunky-dory for the company. While Reliance is free to sell crude oil produced from D6, it is constrained by a Bombay High Court ruling from selling natural gas. The Bombay High Court has barred the company from selling gas from D6 to anyone other than a firm owned by his estranged brother Anil and state power utility NTPC.

Anil Ambani's Reliance Natural Resources Ltd claims right over 28 mmscmd of D6 gas as part of the 2006 agreement that split the Dhirubhai Ambani empire between brothers Mukesh and Anil. NTPC claims 12 mmscmd from D6 at $2.34 per million British thermal unit price Reliance had bid in its 2004 gas supply tender.

Because of the court ruling, gas produced along with oil from MA fields is currently being reinjected with the hope that the court will, in 'national interest,' lift the injunction soon.

D6 gas will double availability of natural gas in the country. Currently domestic gas production and imported LNG total up to 91 mmscmd and meet only half of the demand.

Prasad said the company took just 27 months to produce oil from MA field from its discovery and gas would flow in just six years of its discovery. "Globally, lead time to monetisation is 8-10 years,” he said.

Gas reserves in Dhirubhai-1 and 3 gas fields, MA oilfield and 8 satellite gas fields in the D6 block total upto 2.5 billion barrels of oil and oil equivalent gas, he said.

"40 years after Bombay High was discovered, this is India's major victory in the battle for energy security. With this a new frontier area in the deep waters of our East Coast has opened up," Ambani said on the occasion of producing first oil from MA field. "This event is, no doubt, historic in itself. But there is even better news. For this is just a prelude. It marks the first production from just one field that is part of a larger discovery domain. We can now confidently look forward to production from a series of other fields,” he said.

Besides D6, Reliance has made eight gas discoveries in NEC-25 block in Mahanadi basin of the Orissa coast and has found oil reserves in a Cauvery basin block.