The company will spend $5.2 billion in bringing to production Dhirubhai-1 and Dhirubhai-3 fields in block KG-D6 in Krishna Godavari basin by June 2008. It will invest another $4 billion in laying a 1,386-km pipeline from this city in Andhra Pradesh to Bharuch in Gujarat to transport the fuel.

It will begin producing about 40 million standard cubic meters per day in June 2008 and raise it to peak output of 80 mmscmd in next five months, RIL CEO (Oil and Gas) P M S Prasad said.

KG-D6, world's second largest deepwater find of the last decade, is being brought to production in less than six years of discovery at a cost of $2.8 per barrel of oil equivalent (boe), he said.

World over, energy majors like Shell and Norsk Hydro took 10 years to begin production from gas fields. British Gas started production from its Egypt field in 6.5 years but the output was only 15 mmscmd and the field lay in water depths of 250-850 meters as against KG-D6 in 850-1,100 meters.

"Our finding and development cost is the lowest in the world," he said. Norway's Norsk Hydro's cost for Ormen Lange field is $4.3 dollars per boe (a barrel of oil equivalent) while Total of France has billed Angolan field cost at over $5.
US major Exxon and BP saw $5.5 per boe field development cost each for their Greater Plutonio and Kizomba-B fields in Angola respectively.

Prasad said RIL has seen its field development cost rise from $2.47 billion budgeted in 2004 to $5.2 billion as seismic acquisition costs increased more than 200 per cent and drilling and services charges escalated by 100-200 per cent.

He said almost all of the country's natural gas deficit will be wiped out when KG-D6 field comes into production. The current availability of 91 mmscmd gas meets only half the demand in the country.

"If oil equivalent to the gas production from KG-D6 is imported, it will cost the country $120 billion  (current oil import bill is over $40 billion).

"Considering a well-head gas price of $4.5 per million British thermal unit (mBtu), the value of KG-D6 gas if expressed in oil terms comes to $54 billion. This is a net saving of $66 billion," he said.

He said the doubling of field development cost since 2004 was also on account of increased production planned. In 2004, Reliance had planned facilities for producing only 40 mmscmd.

In-place reserves in Dhirubhai-1 and 3 have gone up from 5.7 trillion cubic feet to 11.3 tcf, he said. RIL will drill 22 development wells to produce gas from the two fields and then pipe it to a gas processing facility here. From this city, a pipeline to Gujarat would be built by April 2008.

Another line to Chennai and Bangalore in the south will be build by 2009-end. It also plans to pay a pipeline from Kakinada to Haldia in West Bengal to transport the fuel. The costs of pipeline to the south and east have not been included in the $9 billion investment planned currently.

Besides selling gas to industries like power and fertiliser plants, Reliance also plans to set up city gas distribution projects to sell natural gas to house holds and CNG to automobiles.

"Natural gas to households will cost Rs 200-210 as compared to the current cost of Rs 300 for every LPG cylinder," Prasad said.

Reliance has so far drilled 22 exploratory wells in block KG-D6 (KG-DWN-98/3), off which 17 have resulted in discoveries, he said, adding oil has been found in two wells in the block.

"Crude oil production will begin in first quarter of 2008 calendar year, earlier than gas output. Oil production will range between 30,000 to 50,000 barrels per day," he said.

Prasad said besides KG-D6, Reliance has found 2.3 tcf of gas reserves in block NEC-25 off Orissa coast. Oil has also been found in shallow water block KG-III-6 in Krishna Godavari basin.