RIL’s gas finds to save country $8.3 bn annually, says Morgan

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New Delhi: Reliance Industries’ eastern offshore KG-D6 gas fields at peak production will help the nation save $8.3 billion annually or 0.7% of the GDP, investment banker Morgan Stanley said on Friday.

“Assuming 80 million cubic meters per day of gas supplies for a year as a whole, India could save $8.3 billion annually,” Morgan Stanley said in a research note on RIL for its clients.

RIL, which is currently producing 31-32 mmcmd, is likely to touch 80 mmcmd in next six months. This peak output could replace close to 26 million tonne of crude oil, which is as much as ONGC produces domestically, or about 17 %of current demand in India, the report said.

“We estimate 20 mmcmd of gas would go to the fertiliser industry and most of the rest to the power industry. This implies that as much as 13 million tonne or 50% of the country’s fertiliser production, and about 12,500 mw of power, or 8-9% of overall power produced in the country, can run on RIL’s gas.”

RIL stated gas production from KG-D6 fields on April 2 and has signed contracts with 15 fertiliser plants to sell close to 15 mmcmd gas. Additionally, it has contracted over 25 mmcmd to 19 power plants and 3.3 mmcmd to steel plants.

Morgan Stanley report stated that 5 mmcmd more gas could go to fertiliser plants and identified power plants that can take more of KG-D6 gas.

Morgan Stanley prescribed that gas allocation to power plants be made at 90 %Plant Load Factor (PLF) or capacity, rather than current scheme of allocation to the 19 power plants at 70 %PLF.

State-run NTPC’s power plants at Faridabad, Anta, Dadri, Kawas and Gandhar were among the plants which have a fuel deficit that KG-D6 can bridge.

Besides, state power plants and private generation units that either buy expensive liquid fuel or imported LNG can also switch to cheaper KG-D6 gas that is priced at $4.20 per million British thermal unit.

Morgan Stanley said there was a lot of uncertainty around the litigation between RIL and Anil Ambani Group firm RNRL which is claiming 35 %of the peak output at $2.34 per mmBtu price.

NTPC is also seeking 12 mmcmd at the same price which is 44 %lower than government set rates.