Mumbai-based Reliance Industries Ltd (RIL) and oil giant BP started producing the first gas at India’s initial ultra-deep water gas field, the R Cluster in block KG D6, some 60 km off the country’s east coast. The field, the first of three in the same block, is expected to produce 12.9 million standard cubic meters (mmscmd) of gas next year. The first field by itself will meet around 10% of India’s gas needs, while at peak production, all three fields are expected to produce around 30 mmscmd (1 bcf/d) by 2023, representing around 25% of India’s domestic gas production, and meeting 15% of the country’s insatiable gas demand by that time period. India has already earmarked that cleaner burning natural gas make up 15% of its overall energy mix in just ten years, from 6.25% currently – no small feat for a country’s whose domestic gas production had bottomed out, forcing it to rely on more costly imported LNG.
Insufficient fuel supply for power generation and transmission capacity, India has suffered from electricity shortages, leading to rolling blackouts. As such, production from the Reliance-BP field is also a boon for the country’s efforts to offset politically and economically damaging black and brownouts in much of the country. India’s new offshore gas production also comes at a pivotal time for both India as well as LNG markets in the Asia-Pacific region, home to around two-thirds of global LNG demand. Supply glut for its part has coincided with (and even given new impetus to) changing contractual dynamics for how the fuel is bought and sold, ranging from reducing the duration of off-take agreements, historically around 15-20 years, to the removal of restrictive destination and other clauses, as well as reducing the number of deals based on an oil indexation formula. India becomes more able to meet its own gas needs, it will be able to dictate even more contractual terms over the LNG it will still need, as well as helping other buyers of the fuel follow the same path.