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India: Reliance and BP plan to invest $5 billion in India gas block

19 Feb 2013

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BP and Reliance Industries plan to jointly invest more than $5 billion in the next three-five years to boost gas output in a block off India's east coast, the companies said Tuesday. Reliance is struggling with declining output at the block in the Krishna-Godavari basin. The fall in output from India's largest gas find has affected natural-gas supplies in India, hurting plans of industries including power and fertilizer which use the fuel.

BP Group Chief Executive Bob Dudley and Reliance Chairman Mukesh Ambani met Indian Oil Minister Veerappa Moily Tuesday and informed him about their plans to develop around 4.0 trillion cubic feet of already discovered natural gas resources, a joint statement said. Mr. Dudley is part of a business delegation accompanying British Prime Minister David Cameron, who is in India on a three-day visit.

Reliance had in 2011 sold a 30% stake in 21 oil and gas blocks in the Krishna-Godavari basin to the British company.

The companies said their plan will help increase gas production starting next year. They plan to also develop satellite projects which are awaiting government approval and start further drilling wells to test 'a possible hydrocarbon pool' below the current producing field.

Moily couldn't be immediately reached for comments. According to the statement, Mr. Moily said his ministry will do the needful to fast track approvals for the projects. The companies also said they would accelerate the pace of exploration and development as soon as they receive the approvals.

Mr. Ambani said the companies are focusing at finding more hydrocarbons and addressing the complexities of the geology along the east coast of India, that has led to fall in the output. The current output from the field is about 19 million standard cubic meters a day, far below Reliance's target of 80 million standard cubic meters.

Dhananjay Sinha, head of institutional research at brokerage Emkay Global Financial Services, said he is skeptical of any major investments to drastically increase output unless the government increases gas prices. A government panel last month recommended that the government scrap its system for setting natural gas prices based on the fields from where it is produced in favor of a uniform pricing model. The government hasn't yet approved the recommendations which will lead to an increase in gas prices.

Reliance currently sells gas from the KG-D6 block at $4.2 per million British thermal unit. The price will come up for revision in April 2014.

See related articles: Reliance Industries shuts in 8th well in KG-D6 block and Reliance Industries gets conditional approval for $1 billion investment in KG-D6 fields

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Source: Dow Jones Newswires

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