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Business News/ Companies / RIL gas output may decline further
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RIL gas output may decline further

RIL gas output may decline further

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Mumbai/New Delhi: At a time when the country is facing fuel scarcity, gas production from Mukesh Ambani-owned Reliance Industries Ltd’s (RIL’s) D6 field in the Krishna-Godavari (KG) basin may further dip to 22.6 million standard cubic metres per day (mscmd) in 2013-14, according to the Directorate General of Hydrocarbons (DGH).

RIL operates the nation’s largest gas reservoir off the eastern coast of India.

According to the projections, the current production of around 37 mscmd will dip to 27.6 mscmd in the next fiscal (2012-13), of which 20.2 mscmd will come from the D1 and D3 blocks and 7.4 mscmd from the MA fields in the KG basin. All these are counted as part of the D6 field.

While director general of hydrocarbons S.K. Srivastava didn’t respond to phone calls, petroleum ministry and RIL spokespersons declined to comment.

This comes at a time when RIL is facing flak for the decline in production and is engaged in a dispute with the petroleum ministry that is proposing to deny $1.24 billion in costs claimed by the firm. RIL had invested $5.69 billion in the block as of 31 March and recovered $5.26 billion.

“If production goes down further in 2013-14 to around 22.6 mscmd, it will be a significant negative for RIL, as even in the worst-case scenario, it was expected that gas production would have fallen to around 35-36 mscmd, and improved thereafter from fiscal 2015," said Alok Deshpande, oil and gas sector analyst at Elara Securities (India) Pvt. Ltd, the Indian arm of a UK-based brokerage.

“It will have an impact on the net present value assigned by the Street to RIL’s exploration and production business as cash flows from the vertical in fiscals 2013 and 2014 will be affected due to gas production falling further," he said. “Also, if production from D6 dips further in fiscal 2014, it may lead investors to reconsider assigning value to RIL’s ability to monetize revenue from its other oil and gas assets as well."

The public accounts committee has already started questioning top executives of RIL about cost escalations in the D6 block and alleged contract violations.

The Comptroller and Auditor General of India, in its Performance Audit of Hydrocarbon Production-sharing Contracts report submitted to Parliament last year, had stated that RIL had breached some terms of a production-sharing contract with the government for the D6 block. It also blamed the petroleum ministry and DGH for their failure to provide adequate supervision of the process.

RIL recently offloaded a 30% stake in 21 hydrocarbon blocks, including D6, to BP Plc for $7.2 billion.

aveek.d@livemint.com

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Published: 15 Feb 2012, 11:15 PM IST
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