RIL's cost of bringing gas to onshore less than $1

Last Updated: Fri, Jun 19, 2009 02:59 hrs

Reliance Industries is selling natural gas from its KG basin fields at $4.205 per million British thermal unit but its cost of bringing the fuel from offshore wells to onshore is less than a dollar without including the cost of exploration, drilling and facilities.

Reliance had on May 22 wrote to the oil regulator Directorate of Hydrocarbons that the post well head cost of the gas - the cost for flowing the fuel from the well through an undersea pipeline network to onshore terminal near Kakinada -worked out to $0.8945 per mmBtu.

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B Ganguly, senior vice president (Commercial) of RIL said the per unit cost has been calculated after taking into account the per unit capex of post-well facilities, the production expenditure or opex and interest cost.

RIL will pay the government 5 per cent royalty after deducting this post well head cost from the gas sale price.

A company spokesperson declined comments but sources said the cost indicated did not include the investment RIL has made in exploration on the Block KG-D6, drilling of wells, well cost and putting up complex sub-sea production facilities.

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Though RIL has not calculated the per unit cost of the development and production expenditure incurred on the field, rough estimates put the cost at around $2 per mmBtu. This together with the post well head cost would bring the total cost of producing natural gas from the nation's most prolific gas field at around $3 per mmBtu.