India’s top auditor CAG has said that audit of the D-6 oil block in the Krishna-Godavari basin operated by Reliance Industries is likely to take 4-5 months more to be finished.

“We require 4-5 months to complete the audit… The process would take time, as this is the first time that we are looking at a private player’s books… It’s a very detailed process”, Comptroller and Auditor General Vinod Rai said.

The CAG is auditing Rs 45,000 crore capital spending by RIL, which is controlled by , to tap natural gas from the D-6 block in K-G basin, following a request from the petroleum ministry in 2007.

He said that RIL had submitted all related documents sought by CAG by the end of January this year.

“All the firms, including RIL, have submitted required documents that we have sought,” said Rai.

However, a Reliance Industries spokesperson refused to offer any comment on the issue.

In a hard-pitched battle last year between the Ambani siblings, younger brother Anil Ambani had alleged that Mukesh Ambani-controlled RIL had inflated capital spending to Rs 45,000 crore from the initial estimate of Rs 12,500 crore for the D-6 block.

CAG’s scope of audit is in respect of the block KG-DWN-98/3 (KG-D6) awarded to RIL for two financial years — 2006-07 and 2007-08 — with access to records of previous years linked to transactions in these years.

It is also understood that the scope of this audit will far exceed the normal course of audit by the CAG and the prime objective may be to detect fraud, if any, by the operator (RIL), allegedly in collusion with oil regulator DGH and the Ministry of Petroleum and Natural Gas.

In 2007, the Petroleum Ministry had asked the CAG to conduct an audit of seven oil and gas blocks, including RIL’s KG-D6 block. After initial reluctance, the CAG is now conducting the audit of four oil & gas blocks, namely KG-D6 of RIL, the Barmer and Ravva oilfields being operated by Cairn India and the Panna-Mukta-Ta.

Source:http://www.hindustantimes.com/RIL-s-K-G-basin-audit-to-take-4-5-months-to-complete-CAG/Article1-544355.aspx

Mukesh Ambani led Reliance Industries’ KG-D6 gas has saved 32 per cent in fertiliser subsidy as urea making plants shifted from costlier liquid fuels to cheaper gas, the Rajya Sabha was informed today.

“The reduction in naphtha usage in existing gas-based unites has reduced the subsidy cost to the government by approximately 32 per cent. The reduction in subsidy by shifting to natural gas has resulted in savings of subsidy bill,” the minister told the Upper House in a written reply.

Fertiliser subsidy is pegged at Rs 49,980.73 crore in 2010-11 fiscal from Rs 52,980.25 crore in the previous year. In 2008-09 fiscal, subsidy was over Rs 1,00,000 crore.

Under fertiliser subsidy, the government would provide Rs 15,980.73 crore for indigenous (urea) fertilisers, Rs 5,500 crore for imported (urea) fertilisers and Rs 28,500 crore for sale of decontrolled fertilisers (DAP, MOP and complexes) with concession to farmers.

Source:http://economictimes.indiatimes.com/news/economy/finance/Reliance-KG-D6-gas-has-saved-32-in-fertiliser-subsidy-Govt/articleshow/5878007.cms

State-run power producer NTPC is likely to sign contracts next week to buy an additional 1.51 million cubic meters a day of gas from Reliance Industries at government-approved price of $4.2 per mmBtu.

The additional gas would be used at NTPC’s Anta and Auriya plants in Rajasthan, Dadri unit in Uttar Pradesh and Faridabad plant in Haryana, official sources said.

Since these plants have already signed Gas Sales and Purchase Agreements (GSPA) for volumes totaling 1.81 mmcmd, only side-letters need to be signed for additional gas.

Sources said side-letters may be signed next week.

This follows Power Ministry’s ultimatum to NTPC to sign contracts immediately. While the government had allocated 4.46 mmcmd of gas from RIL’s eastern offshore KG-D6 field, NTPC has so far signed only for 1.81 mmcmd.

At a recent review of gas withdrawal from RIL’s eastern offshore KG-D6 fields, it was informed that the government had allocated 31.1 mmcmd gas to power sector on firm basis and an additional 12 mmscd on fall back or temporary bais. Against this, only 30.11 mmcmd was been drawn by the power utilities.

It was stated at the meeting that if the power utilities continue to draw less quantity of gas than what has been allocated, there is a possibility that the unutilised gas is allocated to other sectors, they said.

Of the 4.46 mmcmd allocated to NTPC, 2.65 mmcmd was for its Kawas and Gandhar power plants in Gujarat. But the state- owned firm did not want to use KG-D6 gas at these plants since it was in litigation with the Mukesh Ambani firm over fuel supplies to expansion projects planned at these sites.

So, an Empowered Group of Ministers (EGoM) last year decided that the state gas utility GAIL India will swap KG-D6 gas with fuel from other fields. Under this scheme, gas from western offshore Panna/Mukta and Tapti (PMT) fields that was currently supplied to NTPC’s northern India plants, was to be diverted to Kawas and Gandhar. The deficit at the northern India plants was then to be made up by KG-D6 gas.

But since PMT gas supplies to NTPC’s northern plants was only 1.51 mmcmd, a swap of only that volume has been affected.

Sources said GAIL has decided that 1.51 mmcmd of PMT gas that is currently being supplied to NTPC’s northern power plants would be diverted to Kawas and Gandhar. The northern plants will then be supplied KG-D6 gas.

NTPC currently buys 0.79 mmcmd of KG-D6 gas at its Anta, 0.54 mmcmd at Dadri, 0.26 mmcmd at Auriya and 0.22 mmcmd at its Faridabad unit.

With the swap, supplies would go up to 3.31 mmcmd.

RIL currently produces 63-64 mmcmd of gas against a potential of 80 mmcmd as government nominated customers like NTPC are yet to offtake their full allocated quantity.

Source:http://www.business-standard.com/india/news/ntpc-may-sign-for-additional-kg-d6-gas/92099/on

Mukesh Ambani led Reliance Industries has informed oil regulator DGH that four smaller gas finds surrounding the D-1 and D-3 fields in the Krishna-Godavari basin can be commercially exploited.

RIL on February 19 informed the oil regulator Directorate General of Hydrocarbons (DGH) that four smaller gas finds, surrounding the D-1 and D-3 fields, which are currently producing around 62 mmscmd of gas, can be commercially exploited, sources in know of development said.

RIL estimates that four smaller gas finds in the prolific KG-D6 block may contain 1-2 Trillion cubic feet of reserves and may help prolong peak output of 80 million standard cubic meters per day (mmscmd) from the block, sources said.

“These four finds were made in 2008 and RIL had at that time notified them as discoveries. They have now submitted ’Potential Commercialilty Interest’ which means that they can be exploited commercially,” a source said.

Once DGH approves commerciality, RIL will submit a detailed development plan, detailing investment and production potential.

RIL has so far made 25 oil and gas discoveries in KG-D6, of which two – D1 and D3, have been put on production at an investment of $ 8.836 billion. Besides D1 and D3 gas fields and MA oil discovery, nine other gas finds were previously declared commercial and now four more may be added to the list.

In 2008, RIL submitted plans to invest $ 5.91 billion in nine satellite finds but later pruned the list to just four considering government-fixed gas price of $ 4.20 per million British thermal unit did not justify such high additional investment.

The company on December 29 revised this to $ 1.5 billion spanning 0.6 Trillion cubic feet recoverable reserves in the four finds that could produce 10 mmscmd for 6 years.

The remaining five discoveries had been kept for developing at a later date, sources said adding these five and the four finds that are now in the process of being declared commercial may be clubbed together for development.

It will take 4-5 years to bring to production the four finds for which field development plan (FDP) has been submitted and the other finds may not come into production before 2016 by when D1 and D3 output would have hit decline phase.

The discoveries would be tied-up with Dhirubhai 1 and 3 (or D1 and D3) production facilities, which are designed to handle 80 mmscmd of output.

Sources said the mining licence for most of the 1.9 million acres of KG-DWN-98/3 or KG-D6 block has expired that it would need extension from the government to do additional exploration work.
The mining lisence expiry, however, may not impact the approved commercial finds which would be more governed by the field development plan approved by the DGH and the government.

Source:http://beta.thehindu.com/business/article392880.ece

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/

The Government intends to review the allocation of Reliance’s gas produced from the Krishna Godavari (KG) Basin D6 field. It could re-fix allocation as per the amounts drawn so far by the customers.

Ministry officials told Business Line that the Petroleum Secretary, Mr S. Sundareshan, had conducted a review meeting recently on off-take of KG gas by the allottees.

He is understood to have asked them to come back in a fortnight’s time with details on their off-take, and how much they can actually absorb.

A final view will be taken in mid-April, based on which a decision will be taken on the unused quantity. If necessary, a decision on re-allocation could be also considered, officials said.

Asked if there were any penal provisions in the Gas Sales and Purchase Agreement (GSPA) that Reliance has entered into with these customers for non-drawal of gas, sources said “no penal provisions have been provided for non-drawal of gas by the consumers during initial six months of the supply.”

RIL is currently producing 60-62 mscmd of gas, which has been allocated to identified customers from the priority sectors — power, fertiliser, steel, city gas distribution, gas-based LPG plants, petrochemicals sector, and refineries — based on a decision of an empowered group of ministers.

Mukesh Ambani led Reliance Industries, which had planned to ramp up its production to 80 mscmd by March, claims that for want of customers and choked pipeline network, it has not been not able to do so.

Source:http://oilandgasindia.blogspot.com/2010/03/govt-to-review-reliances-gas-allocation.html

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.

No LPG shortage

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