Reliance's entry into the club of integrated energy majors, courtesy the start of oil production in the Krishna-Godavari basin, marks a strategic inflection point for India, as it comes some three decades after the last major find at Bombay High went into production.
When Mukesh Ambani held up a large beaker of greenish sludge on Sunday, the first drops of light sweet crude that the D6 block has produced, it would have been a moment of satisfaction for not just Ambani but also the country.
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The projected production of 550,000 barrels of oil equivalent per day (most of it in the form of natural gas) in about six to eight quarters will increase India's domestic production of hydrocarbons quite dramatically, and mean import savings of about $20 billion.
The start of oil production marks several associated achievements, as the Reliance chairman has pointed out. Production has started in two-and-a-half years of the first discovery, in difficult ocean conditions and at great depth. Operating a production system 8,000 feet under the sea with over 90 large vessels is not something that many companies can do, and it is instructive that the state-owned Oil and Natural Gas Corporation had abandoned drilling in the same block after its efforts didn't bear fruit.
Indeed, many global oil majors had looked at the same fields, and some even began exploration, but none of them stayed the course and they all left. The result is that Reliance now holds the largest exploration acreage in the private sector, and can be expected to build on its achievement.
Its exploration and production assets consist of 54 blocks in eight countries. With 42 discoveries to date, India's largest private sector company has a very creditable success ratio of over 60 per cent.
Having given credit where it is due, it remains true that despite the success of a few companies such as Reliance and Cairn Energy, India continues to rank very low on the list of oil-producing countries. Also, the country's energy needs will continue to grow rapidly; on the basis of the projections that have been made, the additional supply of oil and gas from Reliance will do no more than neutralise the extra demand that is expected to be generated in the coming years.
So while the ratio of import dependency will come down, the total import bill will not (assuming that prices remain unchanged). However, the availability of more domestic gas and crude does mean improved energy security, and that is something to be welcomed.
