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Reliance cuts gas reserves estimate - govt

Source : REUTERS
Last Updated: Thu, Nov 01, 2012 17:10 hrs

By Nidhi Verma

NEW DELHI (Reuters) - Reliance Industries Ltd has cut its estimate of gas reserves in the D6 block off India's east coast by about two-thirds to 3.4 trillion cubic feet (tcf), the oil ministry said, hurting plans for the country to reduce its gas imports.

The D6 block in Krishna Godavari (KG) basin, jointly operated by Reliance and BP Plc , was expected to contribute up to a quarter of the gas supply for Asia's third-largest economy.

But output from KG fields has declined, leaving India more dependent on expensive liquefied natural gas (LNG) imports. Development of the field has been beset by arguments over spending and the strategy for tapping its complex geology.

Reliance's latest revision compares with its December 2006 estimate of 10.3 tcf of reserves and brings the figure back closer to the November 2004 estimate of 3.81 tcf, the ministry said on Thursday.

The company also has revised its capital spending plan from $8.8i billion in 2006 and $2.4 billion in 2004, it said.

"They have again submitted a revised Field Development Plan in September 2012 bringing back the reserves at 3.4 tcf and capex to $6.2 billion. This is being examined critically by DGH (Directorate General of Hydrocarbons)," the ministry statement said.

Reliance has seen its growth outlook marred by falling output from the KG gas fields, and the company has been under pressure from the government and regulators to increase production.

Reliance shares fell as much as 2.1 percent early on Thursday after an anti-corruption activist accused the energy conglomerate of hoarding natural gas and exerting pressure on the government to favour it. They then recovered after it announced a plan for a share buyback to end up 0.2 percent.

Output at the D1 and D3 fields in the KG D6 block has shrunk to 20.5 million cubic metres a day (mmscmd) from 67 mmscmd in 2009-10, never having reached the forecast peak flow of 81 mmscmd, the ministry said.

Canadian company Niko Resources , which has a 10 percent stake in the D6 block, in June also lowered its estimates of the block's reserve.

India's federal auditor last year criticised the government as well as Reliance over development of the KG gas field.

The oil ministry wants Reliance to share all the records and accounts of the D6 block for the years 2008-2009 to 2011-2012 with the federal auditor, the ministry reiterated on Thursday.

Falling output has prompted the government to disallow proportionate cost recovery to Reliance, leading to an arbitration, the statement said.

(Editing by Jane Baird)



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