Explained: What the beginning of gas production in KGD6 means for India

Written by Karunjit Singh, edited by Explained Desk | New Delhi |

Updated: December 20, 2020, 10:35:09 am

KGD6, KGD6 R-Cluster, Reliance Industries Ltd, Reliance K6D6 OIK production, RIL BP partnership, Indian Express explainedThe production of gas from the R-Cluster was supposed to start in May 2020 but has been delayed due to the effects of the Covid-19 pandemic. (Representative image)

Reliance Industries Ltd and BP (British Petroleum) have announced the start of gas production from the R-Cluster, the deepest offshore gas field in Asia. The field is the first of three deep water gas projects in the KGD6 block that were jointly developed by RIL and BP and will be commissioned. RIL holds 66.7% of the KG-D6 block and BP has 33.3% of the block. We examine the importance of this field.

Why is that important?

The R-Cluster, along with the satellite cluster and MJ gas fields in the Krishna Godavari Basin, is expected to produce approximately 30 MMSCMD (million standard cubic meters per day) of natural gas, or approximately 15% of Indian natural gas demand, by 2023. The R-Cluster field alone is expected to have a peak production of 12.9 MMSCMSD, or about 10% of current Indian natural gas production. In fiscal year 20, the demand for natural gas in India was around 153 MMSCMD, of which about half is covered by imports.

RIL and BP will jointly invest a total of Rs 40,000 in these three areas. The production of gas from the R-Cluster was supposed to start in May 2020 but has been delayed due to the effects of the Covid-19 pandemic. The satellite cluster is expected to start production in the next fiscal year.

Are they influencing India’s energy security efforts?

The three projects are an integral part of the plan to increase domestic natural gas production to increase the share of natural gas in India’s energy basket from 6.2% to 15% by 2030. Increasing domestic natural gas production is an important aspect in reducing India’s dependence on imports and improving energy security.

“This will definitely benefit CGD companies that are ramping up and also help meet the government’s goal of increasing the share of natural gas in India’s primary energy mix,” said Sanjay Sah, partner at Deloitte India.

Reliance plans to leverage its existing gas production infrastructure in the KG-D6 block to monetize these three gas discoveries. 📣 Follow the express explained in the telegram

“The field (R-Cluster) is located approximately 60 kilometers from the existing KG D6 Control & Riser Platform (CRP) off the coast of Kakinada and includes an underwater production system connected to CRP by an underwater pipeline,” said RIL in a press release.

Reliance has discontinued production from fields D1D3 and MA in block KG-D6. The existing infrastructure could also serve as a hub for the production of the KG-UDW1 block, which is also operated by a RIL-BP joint venture and is geographically adjacent to the KG-D6 block. Reliance has a 60% stake in the KG-UDW1 block, while BP has a 40% stake.

Increase in the gas tariff

According to experts, the recent changes to the formula for gas transportation tariffs should benefit Reliance and BP’s investments in these three areas. The regulations move away from the existing system of charging consumers based on distance from the gas source and the number of pipelines used for a unified gas tariff system, with one tariff for gas transported within 300 km and another tariff for more than 300 km transported gas applies km away from the natural gas source. The move, which aims to make natural gas more affordable for backcountry customers, will likely benefit Reliance as most customers would not want to be well over 300km away for the gas from the fields in the KG-D6 basin, according to an expert cited will. “Lower transportation tariffs will improve Reliance’s ability to charge gas,” said the expert.

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