* Cuts proven gas reserves estimates by 7 pct
* Sees challenging year for U.S. shale gas JVs
By Prashant Mehra
MUMBAI, May 8 (Reuters) - India's Reliance Industries
cut estimates for proven gas reserves in its I ndian
blocks by 7 percent to 3.67 trillion cubic feet (tcf), less than
the market had speculated on the basis of reports from the
company's partners and newspapers.
The figures, released by Reliance in its 2011/12 annual
report on Tuesday, could ease concerns over the size of the
Earlier this year, Niko Resources said it expected
lower natural gas reserves at the KG D6 block, operated by
Also media reports have said BP had estimated the
gas reserves in the blocks it is developing with Reliance at 1.4
tcf, fuelling concerns about a likely sharp depletion in the
Niko holds a 10 percent stake in the D6 block, Reliance's
biggest, while BP last year acquired a 30 percent stake in 21
oil and gas blocks operated by Reliance, in a $7.2 billion deal.
Reliance has seen its growth outlook marred by falling gas
output from the huge KG gas fields off India's east coast, and
the company has been under pressure from the government and
regulators to raise output.
On Tuesday, India's oil minister said gas output at
Reliance's D6 block is projected to decline to 20 million
standard cubic metres a day (mscmd) in 2014/15 from an estimated
28 mscmd in this fiscal year.
This number is much lower than the 60 mscmd it was producing
in 2010 and far off the planned peak capacity of 80 mscmd.
"It appears that decline in pressure/production has been
higher than originally predicted," Reliance said, explaining the
cut in reserve estimates at certain fields within the D6 block
in its annual report put up on its website.
"Volumes connected to existing wells is lower than envisaged
and gas outside the main channel is in small uneconomic volumes,
not participating in production," the company added.
Reliance did not disclose separate figures for the gas
reserves in the D6 block, but only gave overall figures.
Earlier this week, the Indian government disallowed a plan
by Reliance, under the state policy to promote exploration, to
recover costs of about $1 billion invested to develop the
offshore gas field.
The company filed to resolve issues through arbitration in
November, but so far the government has refused to join the
India's federal auditor had last year criticised both
Reliance and the government over development of the KG gas
SHALE GAS WEIGHS
Reliance, which formed three shale gas joint ventures in the
United States in 2010 to diversify its energy portfolio, and had
been eyeing more alliances, now expects the sector to face
challenges because of weak U.S. gas prices and rising drilling
U.S. gas prices have slid sharply since last summer as
prolific output from shale gas outpaces demand, pushing down
prices to a decade low of less than $2 per million British
thermal units, and crimping profits for producers.
Reliance, which holds shale gas acreage through its ventures
with Chevron, Pioneer Natural Resources' and
Carrizo Oil & Gas, said it will work with its partners to adjust
activity levels and the portfolio mix, to maximise returns on
While the Chevron JV will focus on aggressive cost reduction
targets for 2012/13, exploratory efforts in the Carrizo JV will
focus on assessing 90,000 acres through six wells, Reliance
Reliance shares, which last week slipped as India's most
valuable company, closed down 1 percent at 701.85 rupees on
Tuesday, ahead of the release of its annual report.
The stock, currently valued at about $44 billion, has been
nearly unchanged so far this year, but lost a third of its value
in 2011 on worries about its growth outlook. Last month,
Reliance posted its second quarterly profit drop.