Depending on Reliance D-6 gas to feed fertiliser plant

Vol 10, PW 22 (08 Mar 07) Midstream & Downstream

Fertiliser and power companies in and around Andhra Pradesh are impatiently waiting for Reliance to begin first gas supplies from its KG-DWN-98/3 (D-6) block in the Krishna Godavari basin.

Take Nagarjuna Fertilizers and Chemicals, which has two fertiliser plants at Kakinada. Nagarjuna has been holding regular meetings with Reliance to discuss future supplies of gas from D-6.

“We meet them very often,â€‌ says a Nagarjuna source. “But no agreement has been signed as yet.

â€‌ Nagarjuna has told Reliance it needs between 2.98m cm/d and 3m cm/d for its two plants in Kakinada, which together have an annual urea production capacity of 1.35m tonnes. GAIL presently supplies Nagarjuna only 1.7m cm/d, well below the company’s requirement.

Out of this amount 1.4m cm/d is subsidised APM gas produced by ONGC, while the balance 300,000 cm/d is non-APM free market gas from the Cairn Energy operated offshore Ravva oil and gasfield nearby. Nagarjuna pays Rs3840 per thousand cubic metres for the APM gas (approximately $2.50 per mmbtu including transportation) and $4.30 per mmbtu for the non-APM gas from Ravva.

Indications are that Reliance will offer D-6 gas at around $4 per mmbtu. Nagarjuna tells us Reliance is promising gas to several fertiliser companies and Independent Power Producers in the Andhra Pradesh region and is confident the company will begin delivering gas by mid-June 2008, as it has promised.

“If the chairman of Reliance (Mukesh Ambani) tells us they will begin production by June 2008, I have every reason to believe him,â€‌ Nagarjuna tells us. “If Ratan Tata (chairman of the Tata Group) says he can make a car for Rs1 lakh I believe him also.

â€‌ Industry sources close to the D-6 development programme confirm to this report that Reliance is on track to begin first commercial supplies by June 2008. “Reliance does not have to start producing 80m cm/d from day one,â€‌ says a source.

“Initially it will produce 27m cm/d from 16 wells and then ramp up production gradually.â€‌

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