The Telegraph
Since 1st March, 1999
Email This Page
Reliance drops oil-find bombshell

Sept. 19: Reliance Industries Ltd (RIL) appears headed for a showdown with the directorate-general for hydrocarbons (DGH) once again.

On Tuesday, the oil-to-petrochemicals monolith claimed its natural gas reserves in the Krishna-Godavari basin could exceed 50 trillion cubic feet (tcf).

“Reserves and technical resources put together could exceed 50 tcf,” Reliance’s head of international operations, Atul Chandra, told an oil conference in London, adding that the information had not yet been officially announced.

The new estimate — which has not been independently verified — is far in excess of its earlier estimate of 35 tcf. Even the earlier estimate, which was made a couple of years ago, has not been ratified by the DGH.

Chandra added that one of Reliance’s discoveries at a site he declined to identify could yield 1 billion barrels of oil.

In Delhi, director-general of hydrocarbons V.K. Sibal said he was not aware of Reliance Industries’ claim.

“I do not know anything about this claim so I would not like to comment on it at this point,” Sibal told The Telegraph. Petroleum ministry sources said Reliance had not informed the government about the 50 tcf estimate.

The DGH has taken strong exception to such claims made earlier as they flout the production sharing contract signed with the government which clearly says that no such announcements can be made without first informing it.

On the Bombay Stock Exchange, the RIL scrip ended lower at Rs 1,118.35 after opening at Rs 1,085.25 and rising to an intra-day high of Rs 1,144.95.

Back in June, Reliance Industries chairman Mukesh Ambani had told shareholders that the company had made a crude oil discovery in the MA1 well in deepwater D6 block in the Krishna Godavari basin. “This discovery signifies a large geological play that could result in future discoveries,” Ambani had said.

Reliance officials refused to say anything about the new claim.

“We cannot make any comments at this stage,” a company official said while declining to respond to queries arising from Chandra’s announcement in London.

Refinery date

Chandra said the new refinery being established in Jamnagar by Reliance Petroleum will come up six months ahead of schedule.

He added that the new refinery would be one of the most sophisticated in the world, with a complexity level of 14.4 as measured by the Nelson index, enabling it to process heavy crude.

Chandra said he expected the Indian government to liberalise the coal industry to allow private investment in production, which Reliance would take advantage of.

“Soon we will enter the coal business,” he said.

Reliance is also targeting commercial coal-bed methane production in 2008, Chandra said. He added that Reliance hoped to enter Iraq “at the appropriate time” either on its own or with partners.

Pressure to act

The DGH is not the only one upset by unsubstantiated gas reserve claims. Market regulator Sebi has already asked the DGH to evolve a system whereby such announcements are made only after proper verification since they tend to drive up the value of the stock and Sebi sees this as price manipulation.

Worldwide oil and gas companies have to adhere to a strict code of conduct, but in India, there seems to be increasing tendency on the part of private companies to flout this norm.

Recently, Cairn Energy had been hauled up by the DGH for announcing a higher estimate for its reserves at its oil and gasfields in Rajasthan without informing it, which was in violation of the production sharing contract that the company had signed with the government.

Similarly, Reliance’s partner Niko Resources of Canada was earlier pulled up by the DGH for announcing an enhanced claim on the estimate of the KG basin gas find without following the due procedure of informing the regulator.

Chandra’s claim, however, did not surprise oil analysts and marketmen. “There have been unconfirmed reports over the past one month that the reserves there could be over 50 tcf,” an oil analyst said.

At the AGM in June, Mukesh Ambani had said the company was working on expeditious monetisation of the gas discoveries made in 2002 in the D6 block.

Email This Page