Growth through Energy Security for India

India imports about two-thirds of its crude oil requirement. Exploration and production of oil and gas is critical for India's energy security and economic growth. Reliance's oil and gas exploration and production business is therefore inexorably linked with the national imperative. Exploration and production, the initial link in the energy and materials value chain, remains a major growth area and Reliance envisions evolving as a global energy major.

Over the years the E&P industry has registered significant growth, primarily due to spiraling crude oil and gas prices. With growing competition and ever growing demand for energy, especially from developing countries, the focus is on energy security. Global demand for oil grew by 0.8% from 83.1 million barrels per day in 2005 to 83.8 million barrels per day in 2006. India's share is a meager 0.5 % of global oil reserves of 1,189 billion bbl, while it consumes 3.2 % of global oil consumption every year.

The growing demand for crude oil and gas in the country and policy initiative of Government of India towards increased E&P activity, have given a great impetus to the Indian E&P industry raising hopes of increased exploration. Natural Gas prices in Asia and Europe which are predominantly linked to crude remained volatile and Henry hub natural gas prices averaged US$ 8/MMBTU for 2006. The International Energy Agency (IEA), in its world energy outlook, has estimated investment requirements of over US$ 8.2 trillion over the next two decades in order to bridge the demand supply gap. This is substantially higher than its earlier forcast of US$ 5.3 trillion which underlines a positive demand outlook for energy.

Under the New Exploration Licensing Policy (NELP) of Government of India, blocks have been acquired by various E&P companies for exploration. The efforts have resulted in a number of oil and gas discoveries in India and have changed the perception and prospects of the Indian sedimentary basins and the focus on Indian E&P Industry.

RIL is the largest Oil & Gas acreage holder among the Private sector companies in India with 33 domestic exploration blocks covering an area of about 337,000 sq. km. This is in addition to its interest in three exploration blocks in Yemen, two each in Oman and Columbia and one each in East Timor and Australia covering an area of about 38,000 sq. km. RIL also has 5 coal bed methane (CBM) blocks covering an area of about 4,000 sq. km.

RIL is India's first private sector company in the Exploration and Production (E&P) sector to have discovered large gas reserves. The E&P strategy of RIL is aimed at further enhancing the level of vertical integration in its energy business, and realising value across the entire energy chain, while fulfilling important national priorities.

In the years to come, RIL is well positioned to be amongst the largest value creators in the upstream oil and gas sector. RIL's portfolio of E&P assets, gives it the potential to create value across entire value chain from wellhead to burner tip. Accretion of new reserves through exploration, development of existing oil and gas reserves and development of related downstream infrastructure facilities would result in significant value creation for RIL in future. On a cumulative basis, we have drilled 51 exploratory wells thus far in our acreage in India with a success rate of 61%. These are in addition to the 3 appraisal wells drilled in the KG-D6 block.

Panna Mukta Tapti (PMT) Blocks:

RIL holds a 30 % interest in an unincorporated Joint Venture with British Gas and ONGC, to develop the proven Panna-Mukta and Tapti oil and gas fields. British Gas and ONGC have a 30 % and 40 % share in the fields respectively. The PMT JV commenced direct marketing of gas from April 1, 2005. The JV is supplying gas to consumers like Gujarat State Petroleum Corporation, Gujarat Gas Company Limited, Gas Authority of India Limited etc. The Panna-Mukta fields produced 1.77 Million MT of crude oil and 1,662 MMSCMD of natural gas during the year compared to 1.57 Million MT of crude oil and 1,445 MMSCMD of natural gas produced during the previous year. The Tapti field produced 2,228 MMSCMD of natural gas during the year compared to 2,044 MMSCMD of natural gas produced during the previous year. Impressive progress made on implementation of growth initiatives at the PMT fields. The expanded plan of development (EPOD) for Panna - Mukta fields comprising of the installation of 2 wellhead platforms and drilling of 6 wells is nearing completion. Of this, 4 wells are already operational and work on the remaining wells is progressing as per plan. Efforts are on to increase production by drilling additional 15 wells over the next two years. Meanwhile, the new revised plan for development (NPROD) for the Tapi block is also progressing and is on track for completion during the second half of FY 2007-08. On successful completion, NRPOD is expected to produce 5.7 MMSCMD of gas and about 1,600 BOPD of condensate.

NELP and Pre-NELP Blocks:

12 exploration blocks were awarded under the 1st round of the NELP, 4 exploration blocks in the 2nd round, 9 blocks in the 3rd round, 1 block in the 4th round and 5 blocks in the 5th round of NELP. RIL has been awarded 7 more exploration blocks in the financial year ended March 31, 2007, in the 6th round of NELP. RIL and various partners, including ONGC Ltd. and Oil India Ltd., were awarded two exploration blocks prior to NELP. The Company has also acquired the operating rights of four exploration blocks from Tullow Oil plc, a UK Company. During the year 2006-07, RIL made another discovery in NEC-25 which was seventh in the block. The well lies in the Mahanadi Basin approximately 12 kilometers north-west of the earlier natural gas discovery. Based on the evidence of data obtained from logging and Modular Dynamic Testing (MDT), the presence of hydrocarbons is confirmed. This well named Dhirubhai-32 has been notified to the DGH and the concerned authorities. In an effort to expedite the process, the development plan for the first 6 discoveries has been submitted to DGH for the approval with the gas production targeted for the year 2012. Based on the upside potential of the block, options of higher plateau production from the fields is being evaluated.

Coal Bed Methane (CBM) Blocks:

RIL's venture into exploration and production of CBM is the first of its kind in India and is expected to be commercially operational by 2010. RIL has exploration and production rights of five CBM blocks covering an area of about 4,000 sq. kms. The development plans for the Sohagpur East and West blocks have been submitted to the DGH for approval.

Overseas Blocks:

RIL has interests in exploration of overseas blocks, three exploration blocks in Yemen, two each in Oman and Columbia and one each in East Timor and Australia covering an area of about 38,000 sq. km. RIL had oil discoveries in the on shore Malik 9 block in Yemen. The development plan for the block has been approved by the Republic of Yemen and test production commenced in December 2005. In the Oman offshore block where RIL is the Operator, the existing seismic data has been collected and 2D reprocessing of data is underway. RIL has also signed a Technical Evaluation Agreement with ANH (Columbia's hydrocarbon regulator) and also entered into a co-operation agreement with Ecopetrol (National Oil Company of Columbia) for farm-in opportunities in that country.