Reliance gas and Indian energy

THE discovery by Reliance Industries of a huge gas field in the deep-waters of the Krishna-Godavari basin opens up tremendous possibilities for natural gas as a fuel in India....

Reliance gas and Indian energy Raghuvir Srinivasan THE discovery by Reliance Industries of a huge gas field in the deep-waters of the Krishna-Godavari basin opens up tremendous possibilities for natural gas as a fuel in India. To be sure, it is early days yet. What we have now is just the announcement by the company of its find. There is a long way to go before gas from the field can touch Indian shores and light up homes and hearth. To start with, the company will have to secure a number of statutory clearances apart from getting the data proving the reserves vetted by government agencies. Thereafter would begin the technical and financial part of evacuating the gas from the deep-water field on to the shore and further on to users. Finding financial resources would be the most important link in the chain. Investments could run into thousands of crores of rupees and it is not known yet if Reliance plans to develop the field independently or in association with others. Yet, Reliance's find, when it is tapped, is bound to change the energy profile of the country. Natural gas is the fuel of choice in several western countries with stringent environmental regulations. Yet, the potential of natural gas has never been fully exploited in India, which had an estimated 639 billion cubic metres of reserves till the Reliance discovery. Oil and Natural Gas Corporation's Bombay High field is the largest producer in the country.The gas from this field is processed and transported by Gas Authority of India (GAIL) through its Hazira-Bijaipur-Jagdishpur(HBJ) pipeline . The pipeline, commissioned in the 1980s, is a showcase of how natural gas can be tapped for the energy needs of the country. Along the pipeline are several fertiliser, power and petrochemical plants that run on gas supplied by the pipeline. In recent times, planners in the country have been actively scouting for natural gas sources in the immediate vicinity of the country. Thus was born the idea of sourcing gas from Bangladesh as also the Oman-India gas pipeline which has now been given up. A joint venture company, Petronet LNGwas specifically floated to import liquefied natural gasand it is already implementing a five-million tonne per annum liquefied natural gas terminal (LNG) on the Gujarat coast. There are also a couple of other LNG projects planned by private players such as Shell. The Reliance find could give a fresh impetus to promotion of natural gas as a fuel.We could see the emergence of power plants in the eastern and southern parts fuelled by natural gas. Of course, their viability would depend largely on the cost of gas supplied by Reliance. Similarly, we could see the advent of piped gas for domestic use in these parts. Hopefully, gas will begin substituting crude oil derivatives in applications such as cooking gas, automotive and industrial fuel. There is speculation that the find may sound the death knell for the LNG projects, especially that of Petronet LNG and the plans for import of gas from Bangladesh. It is premature for such conjecture as a lot would depend on the price at which Reliance is able to reach its gas to users. The Petronet project is on the West coast while the Reliance discovery is on the East. Sheer transportation economics would suggest that the discovery may not pose a threat to the Petronet project. As for the Bangladesh project, it should be pointed out that the Reliance gas find, large as it is, can only add to existing and future sources of supply. It would be wrong to presume that it would substitute other sources. India is an energy hungry country and as the economy grows, its hunger is only going to increase. The Reliance gas would appease part of that hunger and not the whole of it. At least, not yet. As for Reliance, well, the company's value could see a sharp rise once it begins commercial exploitation of the field a few years from now. Reliance has been a small-time player in the upstream sector so far with revenues from oil production accounting for under 5 per cent of total revenues. That could change now with the upstream segment beginning to contribute more to the company's top and bottomline. For the government the find would mean lesser reliance on external energy sources even as it can hope for more revenues in the form of taxes and cess from the gas exploited and sold. Finally, the Reliance find, the biggest by any private player in India till now, would seem to vindicate the government's policy of promoting private participation in exploration activity. If this discovery attracts more private players in the future, that would be the biggest gift to the government and the country. Send this article to Friends by E-Mail Comment on this article to BLFeedback@...