New Delhi: India’s biggest company by market value, Reliance Industries Ltd (RIL), may speed up natural gas production after the nation’s top court said the fuel should be sold at the government-approved price, an analyst said.
The Mumbai-based explorer may start production from new areas in the Krishna-Godavari (KG) D6 block by 2014, increasing the field’s peak output to 120 million cu. m per day, said Neil Beveridge, an analyst at Sanford C. Bernstein Ltd in Hong Kong. That compares with RIL’s current estimate of 80 million cu. m of peak output from KG-D6 in the Bay of Bengal, India’s biggest gas field.
The Supreme Court on 7 May said RIL, controlled by Mukesh Ambani, Asia’s richest man, should negotiate gas sales afresh with a company owned by estranged brother Anil Ambani, which sought to buy the fuel at a discount to the state-set price in accordance with a family agreement. RIL has informed the nation’s oil regulator of gas discoveries in eight additional areas in the KG-D6 field off India’s east coast.
Production boost: RIL may start production from new areas in the KG-D6 block by 2014, increasing the field’s peak output.
“The most important word is clarity,” Beveridge said over the telephone from Hong Kong. “Reliance can start developing smaller discoveries now which wouldn’t have been viable at the discounted price.”
RIL shares gained 4.5%, the most since 23 December, to Rs1,079.40 in Mumbai trading, extending a 2.5% increase on 7 May.
Anil Ambani’s Reliance Natural Resources Ltd declined 4.8% to the lowest level since 2 April 2009, after slumping 23% following the Supreme Court’s verdict.
RIL discovered natural gas in four additional areas at the KG-D6 field and informed the Directorate General of Hydrocarbons in February, according to two people familiar with the development. The explorer also submitted a plan to the regulator last year to develop four additional discoveries at KG-D6 at a cost of $1.5 billion (Rs6,750 crore), the two people said.
RIL may be able to raise output from the KG-D6 field by 2014, after the regulator approves the development plan, Beveridge said. Anil Ambani’s planned gas-fired power plant at Dadri, about 50km east of New Delhi, may also be ready by then, he said.