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Gas retail plan: Reliance ties up contracts for equipment

Gas retail plan: Reliance ties up contracts for equipment
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First Published: Tue, Mar 20 2007. 12 21 AM IST
Updated: Tue, Mar 20 2007. 12 21 AM IST
Reliance Industries Ltd, the biggest company in the country by market value, has signed contracts worth $4.5 billion (Rs19,800 crore) with suppliers of pipelines and machinery out of a $5.2 billion planned investment, according to its president, oil and gas, P.M.S. Prasad.
The investments are part of Reliance’s planned spend of $9 billion in developing a gas field off the East coast and building pipelines to sell the fuel to houses and industries, some details of which have already been reported.
Reliance, controlled and managed by Mukesh Ambani, has also earmarked as much as $4 billion to build a pipeline to western India.
The investment plan raises Ambani’s expenditure in his oil, gas, refining, chemicals and retail businesses to $25 billion by 2011. Gas production in India meets only half the country’s needs and consumption is projected to increase fourfold by 2025, according to the oil ministry.
Reliance Gas Transportation Infrastructure Ltd, a Reliance subsidiary, plans to build a 1,400km long pipeline from Kakinada in southern India, where the parent company is setting up a plant to receive the gas from the offshore field. The pipeline will sell the fuel to consumers in Mumbai and Gujarat, Prasad said.
Reliance plans to borrow $2 billion from overseas banks and investors to develop the gas field. It will meet the rest out of its internal resources, Prasad said. He declined to comment on media reports that the group is in talks to invest in a venture with Dow Chemicals Co.
Reliance could borrow about $6.5 billion to fund any investment with Dow, the biggest US chemicals company, according to a Macquarie Securities Ltd report. The Indian company has about $6 billion of treasury stock and a $3.7 billion issue of preferential shares to the promoters, the report said. Reliance may spend $12 billion to buy a majority stake in the venture with Dow, according to reports in the media.
Reliance’s field may double the current gas output in India, which is Asia’s third-biggest oil market, and reduce its dependence on imports as prices rise.
India’s current gas supply of 85 million cubic metres a day (mcmd), including imported liquefied natural gas, falls short of the potential demand of 170mcmd, according to estimates by the oil ministry. Gas consumption may rise to 400mcmd by 2025 if the economy grows at the projected rate of 7-8% a year.
Reliance Industries, owner of the country’s biggest refinery, said on 1 November that the gas field off the East coast will produce twice the quantity previously estimated.
The KG-DWN-98/3 field, discovered in 2002, will probably produce 80mcmd, compared with an initial estimate of 40mcmd, the company said. The gas field, which will start producing in June 2008, will reach a peak production of 80mcmd by December, Prasad said.
Of this, the company may use 25mcmd for its own power and chemical plants.
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First Published: Tue, Mar 20 2007. 12 21 AM IST
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