It is finally here. After years of waiting and rumours of delays Reliance Industries has finally started pumping oil from its massive KG-D6 block of the Krishna Godavari basin.
Initially about 5,000 bbls/day of crude is being pumped out although the plan is to reach 550,000 bbls/day over the next six to eight quarters.
While the timing fits well with the company's planned commissioning of its second refinery over the next few months, Reliance has indicated that it is would be selling the oil to Indian public sector refiners such as Hindustan Petroleum which operates a refinery at Visakhapatnam.
Gas production is expected to start only in the first quarter of 2009. But how quickly Reliance will be able to sell depends on when an ongoing legal battle with Anil Ambani led Reliance Natural Resources Ltd is settled.
The dispute relates to supply and pricing of natural gas.
As for the price of gas, although the government has recommended $4.20/mmbtu Reliance appears to be looking for more.
"In the long term, we must have a road map towards market price," Mukesh Ambani, chairman of Reliance, said yesterday.