The Hindu Business Line : Reliance hopes to have gas price formula in place by July

The company is optimistic of starting gas production from the Block in July 2008 and a formula has to be in place a year prior to beginning production.

Even though RIL remained non-committal on the price of the gas, speculation is that RIL's gas will cost between $4.4 and $4.6 per million British thermal unit (mBtu) at Kakinada. This price excludes the marketing margin, transportation tariff and four per cent Central Sales Tax.

The company made a presentation before the Petroleum Ministry today on its gas-pricing formula based on quotes it had invited from main consumers, power and fertiliser companies. Subsequent to the Petroleum Ministry's approval the price of the gas would be determined.

Indications are that the formula links the price to Brent crude oil price, with a floor of $25 per barrel and a cap of $65 per barrel. The price will be calculated based on a year's average of Brent crude oil price.

While declining to comment on the proposed pricing formula or the observations made during the course of the meeting, Mr P.M.S. Prasad, President & CEO (Oil & Gas), RIL, said, initially the company plans to start producing 30-40 million standard cubic meters per day (mscmd) of gas peaking at 80 mscmd by 2009, he said.

Mr Prasad said Reliance plans to produce crude oil also from the KG Block in 2008. Production will initially start at 30,000-40,000 barrels a day and peak at about 50,000 barrels, he said adding ``at the moment, our focus is on gas production.'' RIL has diverted rigs meant for finding oil for developing the Dhirubhai-1 and 3 gas fields.

``New rigs are to arrive in 2008. Five rigs are to be added between now and September 2008,'' he said adding the two rigs on KG-D6 will drill continuously to put 18 producing wells. ``We plan to submit a development plan for the oil find in KG-D6 by next month and will begin work after regulatory approvals,'' he said.

Exploration & Production activities

Reliance Industries Ltd is looking to acquire exploration and production blocks in Peru and Colombia. `

`We are purposely staying away from discovered and producing fields because returns are not commensurate,'' he said.

Currently, Reliance, India's largest private oil refiner, has no overseas refineries, but has exploration assets in West Asia.

He said Latin America and Australia are among the countries where the company was looking at taking over oil and gas exploration acreage. ``We have bid for two to three blocks with Australia's Santos in that country's latest licensing round,'' he said.

Eyeing refinery stake

Reliance Industries Ltd is looking at acquiring equity stake in refineries in the US and West Asia. Mr P.M.S. Prasad, President & CEO (Oil & Gas), RIL, said: ``Operating a refinery or building a new refinery or upgrading an existing one is our biggest strength. Wherever there are opportunities we are certainly interested.''

Various refineries are rationalising their portfolio and the company was studying at least a couple of them. Mr Prasad was categorical in stating that none of the refineries RIL was eyeing belonged to Shell or Chevron. "There are several offers... some for sale of part stake and some for outright sale.''

RIL is also looking at setting up refinery projects in West Asia. As regards the project in Iraq, he said that the company had discussions with the Iraqi Oil Minister. Iraq is looking at upgrading and revamping its existing refineries and RIL was eyeing opportunities there.

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