Don't believe people who say Reliance gas will run out

Vol 10, PW 23 (22 Mar 07) People & Policy

Anyone who thinks gas production from Reliance’s D-6 block in the Krishna Godavari basin will last only eight or nine years should think again.

“Our current development plan with the DGH for 80m cm/d production over eight or nine years is based only on two discoveries and 11.3-tcf recoverable,â€‌ says a well-placed company source. “Since then we have made many more discoveries that will be developed.

We see a lot of upside. KG basin gas is not likely to run out.

ONGC and GSPC have also made big discoveries.â€‌ Reliance has set aside a budget of $5.2bn for its D-6 development programme, of which approximately $2bn is from External Commercial Borrowings and $3bn from internal resources.

Of this $5.2bn, around $4.5bn has already been committed to contractors. “Engineering provisions have been made to accommodate a hike in gas production,â€‌ adds Reliance.

Reliance tells us initial production from D-6 from mid-2006 will be in the range of 20m to 30m cm/d and slowly ramp up to 80m cm/d by the year-end. Further hikes in production will depend solely on the pace of D-6 development.

Customers in Andhra Pradesh, as the state nearest the discovery, will be the first to benefit. “We will give gas to every customer in Andhra Pradesh who needs it,â€‌ stresses Reliance.

“If they build more capacity, we’ll give them more gas.â€‌ Reliance is expected to benchmark the retail gas price from D-6 with the price charged by other private producers in India, notably Niko, which also holds 10% of D-6, and sells gas to customers from its Hazira field in Gujarat, Cairn India, from Ravva and Reliance itself, which alongside British gas and ONGC, sells gas from the Panna, Mukta and Tapti fields offshore Mumbai.

“There is no ceiling on the price in the PSC for D-6,â€‌ we hear. “All it says is that the price must be market-driven and comparable to the price others are charging.

Only if the price is not comparable will the government step in.â€‌