Reliance Industries Ltd will further invest Rs 40,000 crore with its partner BP Plc for development of its flagship gas field KG D6 in Krishna Godavari basin off India’s east coast, chairman Mukesh Ambani said on Thursday, after a hiatus of seven years when the British oil giant stepped in by picking up a significant minority stake in a block that would become India’s poster boy for natural gas output. With this new investment, Reliance Industries expects to bring in 30-35 million cubic meters of natural gas production per day and sustain it over the next 7-8 years, Mukesh Ambani said, adding that the new government policies facilitated fresh investments in the aging KG-D6 block.
The joint venture, in which Reliance Industries holds 60% operating stake and BP Plc has 30% equity stake, has started awarding works contracts for the development of R-series gas fields, the British firm’s group chief executive Bob Dudley said. The D-34 field, which will be developed, is a dry gas fields in water depths of up to 2,000 meters, approximately 70 kilometers offshore, Dudley said. Further, the venture plans to submit field development plans for development of satellite fields and D-55 fields by the end of the year 2017, Dudley said.
KG-D6 block is estimated to have total proven reserves at 2.65 trillion cubic feet of natural gas. However, the production at this field in the Krishna Godavari basin has been on a decline which Reliance Industries has maintained is due to natural aging of the block. Earlier last year, the natural gas output KG-D6 fields fell 29% on-year to 24.4 billion cubic feet in the fiscal third quarter.
Investments in oil and gas have shrunk due to falling prices of hydrocarbons. Natural gas prices in India have been market linked since November 2014, and have continuously fallen since then. The KG-D6 field of Reliance Industries, and the fields of Oil and Natural Gas Corp and Oil India Ltd, currently fetch $2.48 per mmBtu. The price was last revised in April, with it being the seventh straight cut in two-and-a-half years. However, Mukesh Ambani said that both the companies are comfortable with the current gas pricing mechanism.
The renewed investments in the KG-D6 fields, which will be made over the next three-five years, will reduce India’s import dependence by as much as 10% by the year 2022, substituting $20 billion worth of LNG imports, Bob Dudley said. Reliance Industries also said it would continue to make periodic announcements on KG-D6 developments over the next one year. Mukesh Ambani said he expects the new fields in the KG-D6 block to come onstream from the year 2020.
(Originally published on Thursday, June 15 on www.financialexpress.com)