Reliance Industries has put the cost of producing natural gas from its prolific Krishna Godavari basin fields at USD 2.9 per million British thermal unit and the firm will earn a pre-tax return of 13 per cent.
RIL and its Canadian partner Niko Resources is investing USD 8.8 billion in developing Dhirubhai-1 and -3 fields on top of about USD 1 billion it spent on discovering and appraising the two gas discoveries.
The exploration and development cost of D1-D3 fields at 10 trillion cubic feet gas reserves (1.5 billion barrels of oil equivalent) certified by oil regulator DGH, works out to
be USD 6.7 per boe or USD 1.1 per mmBtu, a source in the consortium said.
The operating cost is estimated to be about 33 cents per mmBtu. At the government approved natural gas sale price of USD 4.2 per mmBtu, the royalty payable to the government at average 7.5 per cent works out to 32 cents per mmBtu.
The total pre-tax cost including exploration, development, operating expenditure and royalty would be USD 1.75 per mmBtu, he said, adding the gas reserves would accrue to RIL-Niko after deducting government’s share of revenue which would be around 40 per cent over the life of the field.
When contacted, the RIL spokesperson declined to comment.
The total cost of production after profit share works out to be USD 2.9 per mmBtu, the source said, adding this cost did not include return on capital.