New Delhi: India’s largest company by market value, Reliance Industries Ltd (RIL), may produce 50% more natural gas from the country’s biggest field than the company estimated, easing shortages that idled utilities in the world’s second fastest growing economy.
The Krishna-Godavari (KG) region in the Bay of Bengal may yield as much as 120 million cubic metres a day (mcmd) after eight new discoveries, V.K. Sibal, director general of hydrocarbons, had said in an 8 April interview. The previous target for the field, scheduled to start production in the next 12 months, was 80mcmd.
RIL is investing $5.2 billion (Rs20,800 crore) to develop the KG region, which will more than double the country’s output and may alleviate shortages that have shut down one-third of the nation’s gas-fired power plants. Demand may quadruple to 400mcmd by 2025, if the economy expands at the government’s projected annual rate of 7-8%, according to the petroleum and natural gas ministry.
Future fuel: With crude oil prices at a record $111 a barrel, officials say it makes sense to bring smaller discoveries into production. India’s demand for natural gas may quadruple to 400 million cubic metres a day by 2025, if the economy expands at the government’s projected rate of 7-8%.
“Such finds may make explorers look at India as a country rich in hydrocarbons,” said Jaspreet Singh, an associate vice-president at brokerage Prabhudas Lilladher Securities in Mumbai. “India needs to increase oil and gas output because fuel demand is rising and the supply gap is widening,” he added.
RIL’s profits almost doubled in the past three years on record earnings from processing crude oil into fuels. The Mumbai-based company intends to start production during the second half of the financial year ending March 2009, chairman Mukesh Ambani had said last year.
The company’s shares rose as much as Rs49.65, or 2.05%, to Rs2,467.70 on the Bombay Stock Exchange on Friday. The exchange’s benchmark Sensex lost 0.6% to 15,695.10.
“I don’t have any doubt that output from the east coast will keep on increasing,” Sibal said in his office at the directorate general of hydocarbons, India’s oil and gas regulator. “The cost of developing adjoining fields will be incremental because they are anyway putting in place infrastructure to bring gas from the biggest field onshore.”
Sibal said estimates for the increase are based on initial details provided by RIL.
“We have not submitted a new development plan” to Sibal’s office, RIL spokesman Paresh Chaudhry said in an email. “Any additional production approvals will be possible only on submission and evaluation of a development plan.”
India is auctioning rights for a record 57 gas-producing areas this year as the government contends with record crude oil prices while seeking to sustain annual economic growth of more than 8%. BG Group Plc., the UK’s third biggest natural gas producer, and Santos Ltd, Australia’s third biggest oil and?gas?firm, are?among?drillers that won rights to explore in India last year.
India sold 165 areas in six previous rounds, yielding 49 oil and gas finds, Sibal had said on 8 January.
Crude oil prices at a record $111 a barrel make it viable to bring smaller discoveries into production, Sibal said. US natural gas futures for delivery at the Henry Hub in Louisiana rose 31% in the past year on the New York Mercantile Exchange.
Fields adjoining RIL’s main discovery, called D-6, will be linked to pipes and booster stations being built to transport fuel from the field, Sibal added.
“On the basis of the infrastructure that is being put up, there is very little doubt that gas output from Reliance’s fields will be more than has been talked about,” said Deven Choksey, chief executive officer at Mumbai-based KR Choksey Shares and Securities, which manages $550 million for wealthy individuals.
Natural gas prices may rise 50% within five years because producers, including Russia and Nigeria—which hold almost half the world’s gas—are curbing exports to meet growing domestic use, said Chris Jarvis, president of Caprock Risk Management in Hampton Falls, New Hampshire.
India plans to resume talks with Pakistan over a pipeline to transport gas from Iran to meet rising demand, oil minister Murli Deora had said on 28 March.