India's Reliance Industries Joins the Oil Club

Mukesh Ambani, one of the world's richest men, held a large glass of greenish sludge in his hands, the first ooze of light sweet crude that his company, Reliance Industries, has pulled from deep beneath the Bay of Bengal.

That sludge, Ambani says, is India's path to energy independence and Reliance's entry into the club of global energy majors. "This accomplishment marks a strategic and emotional inflection point for every Indian. It proves that we can disprove the naysayers of the world, who had written off India's ability to produce its own oil and gas," he said Sept. 21.

Reliance has launched production as global oil majors are facing fading, new discoveries and increasingly powerful oil companies—both private and state-run—from the developing world.

High-Tech accomplishment

Pulling oil from 8,000 feet under the cyclone-prone, choppy waters of the Bay of Bengal is a technological feat, the sort of high-tech, high-cost deep-water drilling that was once the province of just a few of the world's top oil companies.

It also comes at a favorable time for India, the world's fifth-largest energy consumer. The nation imports about three quarters of its oil and has been stumbling under growing oil and gas import costs and an onerous oil subsidy bill.

Within 18 months, oil and gas production from block D6 of the Krishna Godavari basin will increase India's domestic production by 40%, hopefully cutting off about $20 billion from the nation's $77 billion oil import bill, according to Reliance officials.

The company says the 2,952 square mile block holds 2.5 billion barrels of oil equivalent, 80% to 85% of it natural gas.

India still ranks low on the list of oil-producing nations, and the find is unlikely to put a big mark in global demand for oil, which the International Energy Agency pegs at 86.8 million barrels per day.