Reliance may miss June ‘08 deadline to produce KG gas

MUMBAI: Reliance Industries (RIL) is likely to miss the June 2008 deadline for commercial production of gas from the Krishna Godavari (KG) basin. The delays are mainly due to late deliveries of deepwater drilling rigs by Transocean Inc. RIL is relying on these oil rigs to start the commercial production of gas from the basin. Production is now likely to commence towards the end of next year, according to some international estimates.Transocean’s drilling rig Discover 534 that was expected to commence drilling operations in the KG basin next month will now be available only by August. The rig is now deployed by Shell for its operations in Pakistan.

Similarly, Deepwater Expedition, another drilling rig that belongs to Transocean, the world’s largest offshore rig operator, will be available for drilling in KG only by late March next year. This rig was initially expected next month, a date that was delayed by eight months to February 2008, according to a fleet report dated December 1 on Transocean’s website.

RIL’s official spokesperson declined to comment on this issue. A mail sent to the company remained unanswered till the time of going to press.

A report by research house Tristone Capital on the Niko Resources website says, “The company remains on schedule for a July 2008 start-up, but with the global shortage of services this may slip to later 2008.” Niko is 10% stake holder in RIL’s D-6 block in the KG basin, where 14 TCF of gas was discovered in 2002. Commercial production was slated for 2006 at the time of the company submitting its initial development plan. The company proposes to invest $2.47 billion in the project.

RIL later submitted a revised development plan to the government with a proposal to invest $5.2 billion to start commercial production of 40 million metric standard cubic meters per day (mmscmd) of gas by June 2008 and doubling it to 80 mmscmd by 2010.Finding and development costs for gas are going north mainly because of unavailability of rigs in the international market.