Reliance Industries Limited (RIL)has entered into a MoU with the state-run flagship explorer, Oil and Natural Gas Corporation (ONGC) to share the gas pumping infrastructure lying off the Andhra Coast. RIL used this facility for its oil and natural gas reserves in the KG-D6 basins located in the Bay of Bengal on the eastern coast of the country.
Mukesh Ambani led RIL and ONGC announced the deal in the last week. The companies have entered into this definitive agreement after jointly conducting a study to work out the modalities for sharing of infrastructure, identifying additional requirements, as per the official statement from Reliance. The statement also added that the study would be spread further over nine months and the commercial terms of the sharing arrangement would also be worked out during this course of time. ONGC has made nine discoveries lying next to RIL owned KG-D6 blocks. According to an internal study, ONGC has lined up a total expenditure of $9 billion for the block by 2030. With this deal, it will save capital expenditure of around $4-5 billion and will also be benefited by the ease of sharing RIL’s gas processing and transportation facilities for the KG basin. The deal will also include RIL’s gas gathering station which helps to take the fuel to land and its processing plant in Andhra Pradesh.
ONGC Chairman Sudhir Vasudeva had previously said, “We want to monetize our fields in the Krishna-Godaveri (KG) basins quickly. If we can use the capacity then we can bring our fields in their (RIL’s) neighborhood into production without waiting for our own facilities to come up.” Reliance is docked with a huge capacity as it has built facilities under the sea and on the shore capable of pumping up to 120 million cubic metres per day (mmscmd) of gas from its KG-D6 blocks. “It makes immense sense. This is not new. It (infrastructure-sharing) deals happen all over the world as it reduces costs,” added Vasudeva. According to PK Borthakur, ONGC director (offshore), there are well- established global norms for sharing infrastructure. “Nowhere in the world, have companies kept building (or duplicating) infrastructure, he said.
This is the second deal between ONGC and RIL to share the infrastructure. Previosly, ONGC had hired Dhirubhai Deepwater KG-1 drilling rig from the energy giant for four years. Currently, it is important for the state run company to increase its future volumes of production. ONGC found block in KG-DWN-98/2 will be operational by 2016-17 with a peak production of 22 mmscmd.