Wanted: a market for Reliance's Krishna Godavari gas

Vol 6, PW 18 (06 Nov 02) People & Policy

HAVING GAS IS one thing, finding a market is quite another.

Reliance needs to come to terms with this harsh reality as it begins the arduous task of making money from its discovery. The obvious market is Andhra Pradesh.

"For the past four months Reliance has been telling everybody in Andhra Pradesh it has 4 tcf of gas," a source reveals. Opinion is divided on how long it will take Reliance to bring its gas to market.

Reliance itself estimates over the next three or four years. Other industry analysts estimate it will take double this time.

"Development of deepwater gasfields is very expensive," reveals DGH boss Avinash Chandra. "It is in Reliance's interest to begin development quickly." Excited, oil minister Ram Naik reckons Reliance gas could boost industrialisation in Andhra Pradesh, Orissa and Bihar.

Others are not so optimistic. "There is hardly any market in Andhra Pradesh," reveals an industry analyst.

"Power and fertiliser factories are natural customers for gas but Andhra Pradesh is power surplus. In Orissa and Bihar local coal is much cheaper than gas." Reliance's only option would be to look west.

"Demand is in the western and northern regions, not in the east or south." Reliance will have to either pipe the gas west or set up a power station at landfall and sell it to western and northern India. Another possibility is to promote a southern India electricity grid.

Easier said than done, unless far-reaching electricity reforms are put in place in Reliance's target market. "In most states, the agricultural sector gets free power," adds a source.

"Regulatory issues are yet unclear for gas distribution."