Reliance Amends Development Plan for Krishna-Godavari Block

Reliance Industries Ltd.

Reliance Industries is seeking approval for an amendment that has been filed relating to the initial development plan for the Deepwater Block KG-DWN-98/3 (referred to as KG-D6) with the Director General of Hydrocarbon.

The Deepwater Block KG-DWN-98/3 in Krishna - Godavari Basin off the East coast of India in Bay of Bengal was awarded to the Company and NIKO Resources Ltd, Calgary, Canada (NIKO) under NELP-1 bidding round. The Company, as operator of the block holds 90% of the participating interest and NIKO the remaining 10%.

The block covers an area of 7645 sq kms and its north-western boundary is about 40-60 kms southeast of Kakinada in Andhra Pradesh. Water depth in the block ranges up to 2700 m.

The Company made the world's largest gas discovery in 2002 in this block.

Based on the initial reserve estimates of the block the Company prepared an Initial Development Plan for developing two discoveries Dhirubhai 1 and Dhirubhai 3 in the block. The Initial Development Plan envisaged production plateau of 40 mmscmd.

The Initial Development Plan was submitted to the DGH in May 2004 and was approved in November 2004.

Subsequent to the approval of the Initial Approved Development Plan for Dhirubhai 1 and Dhirubhai 3 gas fields, a lot of exploratory work has been done in the block to assess the overall hydrocarbon potential and the recoverable reserves in these fields. This includes acquisition of additional 3D seismic data, drilling of additional exploratory wells resulting in 13 discoveries and extensive coring of two development wells.

The Company has also obtained independent assessment of 2P reserves for the Dhirubhai-l and Dhirubhai-3 gas discoveries at 11.3 TCF which is almost double of the earlier estimates.

In view of the significantly higher hydrocarbon potential and large projected deficit of gas demand, the Company has sought approval for the following:

  • Increase in production rate from 40 mmscmd to 80 mmscmd
  • Enhanced facilities for production, collection, evacuation and handling of gas, both onshore and offshore.

The revised estimate of capital expenditure for the enhanced production profile is approximately $5.2 billion.

Despite the increase in production rate, the project is on schedule for first gas by second half 2008-09.

This project is the first deepwater gas development project in India and on commissioning would be among the largest and most complex deepwater gas production system in the world. This project will be completed in about 6 years from the first discovery making it amongst the fastest deepwater gas developments in the world.

The gas production from KGD6 further fortifies Reliance's commitment to provide India towards greater energy security in view of the existing energy deficit. The increased production would double the current indigenous gas availability in the country. The production rate of 80 mmscmd is equivalent to 450,000 barrels of oil equivalent per day, which is about 25% of the current oil import in the country. This would substantially improve the balance of payment situation that is worsening on account of oil imports.

The Board of Directors of the Company, will review the project and its financing plan on November 9, 2006. The Board will examine various funding options including project financing debt, convertible bonds or other hybrid instruments to achieve the optimal financing for this project.