Reliance Industries [Get Quote] has created history by flowing oil from the nation's first deep-sea oilfield, but gas production from the eastern offshore KG basin will begin in January, four months behind the deadline.

Reliance began oil production from its predominantly gas-rich KG-DWN-98/3 or D6 block on September 17 with initial oil flowing at the rate of 5,500 barrels per day, the company Chairman Mukesh Ambani announced on Sunday in Mumbai.

Crude oil production will reach 20,000 barrels per day (1 million tonnes a year) in a month's time and the peak output of 40,000 barrels (2 million tonnes) of oil will be achieved in the first quarter of 2010.

Company CEO and President Oil & Gas P M S Prasad said Reliance had internally set 2008 as the target for oil and gas production from D6, but officially it had always stated that gas production will begin in second half of 2008-09.

Reliance is selling the first oil from D6 to HPCL's [Get Quote] Vizag refinery on spot basis and will look for long-term contract when the production stabilises when it reaches peak.

The first cargo of oil would go to Hindustan Petroleum's Vizag refinery and the crude was benchmarked on Papis and Nigeria bonny light, an RIL official said.

The gas output, to begin with, will be around 15 million mmscmd rising to 40 mmscmd in three months. 

Mukesh Ambani said RIL discovered oil for the first time in the KG basin only in February 2006 and it has began oil production in September 2008. "We have been the fastest and we will be a major player in oil and gas production," he said.

"In 2002 we were nowhere and today we were among the two 15-20 companies in the world and we will be climbing fast," he said adding RIL has already become a major player in oil refining.

Ambani said it is not only KGD6 where huge reserves of gas has been found, but also in Mahanadi and Cauvery basins.

RIL has made discoveries in four major basins in India and achieved an exploration success of 63 per cent, which is higher than global averages.

He said RIL's 85-90 per cent of hydrocarbon production would be gas and remaining 10-15 per cent oil.

The oil found in KG basin is of high quality and it would most probably be sold to Hindustan Petroleum refinery in Visakhapatnam and in Chennai.

"The crude is of very high quality and it would be sold to domestic public sector refineries," he said.