KG Basin – Hopes Afloat

The Krishna – Godavari basin spans across the coastal districts of East Godavari, West Godavari and Krishna in Andhra Pradesh. The basin is currently the hot spot for the Indian oil and gas industry. Three oil and gas majors – Reliance Industries Ltd (RIL), Oil and Natural Gas Corporation (ONGC) and Gujarat State Petroleum Corporation (GSPC) have discovered gas, with some oil, in three different blocks in the KG basin. Men in orange overalls are engaged in a different kind of activity in the area – exploring for hydrocarbons, drilling as well as production testing.

Reliance India Limited – the biggest private sector petroleum company in India is planning to spend $12 billion on producing and transporting the gas across the country while ONGC has announced $3 billion investment in the area which is expected to be raised up to $10 billion later.

With a combined investment of over $30 billion as reported, the KG basin is viewed as an answer to the country’s gas deficit. The basin is expected to produce 120 million cubic meters of gas per day – about four times the gas the country would have received from Iran through the Iran-Pakistan-India pipeline. Besides, the KG basin gas is likely to be 30 per cent cheaper. Many opine that the KG Basin will wipe out India’s gas deficit, halve the power deficit and change the fortunes of fertilizer companies.

Reliance Industries have commenced oil production from its D6 well in the Krishna Godavari basin last week and plans to release gas from the well by January 2009. According to the chairman of the group Mukesh Ambani, “This will account for 40% of the country's current hydrocarbon production”.

Whenever the gas becomes available, it will have a huge impact on the country’s fertilizer and power companies. Power and fertilizer plants, which consume 70 per cent of the gas available in the country, hope that the gas will allow them to operate at full capacity from the rate of 50-60% of their total capacity. Once all the gas from the KG basin begins to flow, perhaps after 2013, it can add at least 10,000 Mw to the country’s power output! That is more than half the country’s current peak power deficit.