12-06-08 Reliance Industries Ltd. (RIL), India's largest company by market value, will start selling natural gas this year at the equivalent of a fifth of global prices, easing the nation's import bill at a time of record crude oil costs.
Reliance will sell gas at $ 25.20 a barrel of oil equivalent, compared with more than $ 135 in global markets, Chairman Mukesh Ambani told shareholders in Mumbai. Piping the fuel from the Krishna Godavari basin off India's eastern coast will cut rupees 1.14 tn ($ 27 bn) from the country's import bill, he said.

Reliance Industries is investing $ 5.2 bn to develop Krishna Godavari, the nation's largest field that is expected to more than double India's gas output. India, Asia's third-biggest economy, imports 70 % of its oil and doesn't produce enough gas to meet demand from power and fertilizer makers.
The Mumbai-based group's petroleum unit will also commission its new refinery "earlier than scheduled'' in the second half of this year, Ambani said. Completion of the refinery will increase Reliance's ability to process crude oil to 1.24 mm bpd, equivalent to about 2 % of global capacity, he said.

The 580,000-bpd Jamnagar refinery is being built adjacent to an existing 660,000-bpd plant owned by Reliance. The combined facility will be the world's biggest, according to the parent. The soaring cost of hiring rigs and exploration equipment and a government cap on gas prices may curb Reliance's profit from the new field in the Bay of Bengal that will produce 80 mm cm of gas a day.
"We were short of deepwater equipment,'' Ambani said. The company will add six more rigs in the second half of the calendar year, he said.

Rig use in the Asia-Pacific region by explorers such as Chevron, Total and Reliance rose to a 16-year high in May on increased oil and gas demand, a report said. India, the biggest user of rigs in the region, deployed 81 rigs to drill on land and water, Baker Hughes said.
The government has ordered Reliance to sell natural gas from the Krishna Godavari field for $ 4.2 per mm Btu, less than the $ 4.5 it had sought. Reliance has installed 110,000 tons of offshore equipment and has completed 90 % of all onshore production infrastructure, Ambani said.

The government's decision to restrict fuel subsidy to state-run refiners was partly responsible for Reliance shutting its fuel stations that sold gasoline and diesel processed at the existing 33 mm-tpy Jamnagar refinery, Ambani said.
"Absence of a level-playing field between private and public sector petroleum retailing companies gave rise to an unviable situation,'' Ambani said. "Reliance had no alternative but to suspend sales from its retail outlets.''

The company accounted for 14 % of diesel sold in India when it stopped retail sales, he said.
India, which caps the retail fuel prices to control inflation, reimburses state-run refiners for selling fuel at subsidized rates by issuing bonds and through sharing of losses between refiners and explorers. Private refiners aren't reimbursed for losses.