Govt clears RIL's $1.5-bn KG-D6 capex; Moily sees gas output rising by 2016-17

The government has given the go-ahead for a $1.5 billion field development programme proposed by Reliance Industries Ltd for the KG-D6 block, minister for petroleum and natural gas M Veerappa Moily said today.

The minister said the current gas production of 105 million standard cubic metres per day (mmscmd) in the country could go up to 175 mscmd by 2016-17.

India's gas production, especially from the Reliance operated KG-D6 block off the east coast of India, has been steadily declining amidst a steady rise in investments in the block by its operators, including RIL, BP and Nikko.

According to estimates available with the Directorate General of Hydrocarbons (DGH), the KG-D6  gas block, the country's biggest, would produce 19.178 mmscmd in 2013-14, 17.4 mmscmd in 2014-15 15.027 mmscmd in 2015-16 and 19.781 mmscmd in 2016-17.

The investments, however, have only resulted in declining production although they helped to reduce the government's profit share from the block.

Meanwhile, the government has also favoured gas explorers with a hike in the price of domestically produced gas from the current $4.2 per mmscmd to $6.8 per mscmd, after initially proposing a doubling of prices to $8.4 per mmscmd from April next year.

The oil ministry had last week agreed to a reduction in the price of gas from the proposed $8.4 per mmscmd to $6.8 per mmscmd under pressure from the finance ministry.

The falling output of gas, in fact, has failed India's plans to step up power generation and also achieve some semblance of energy security. It has also in the process pushed up the country's import bill and subsequently, its current account deficit, which is currently estimated at 4.8 per cent of the country's gross domestic product (GDP).

The RIL stock was trading at Rs923.15, up Rs6.10 (or 0.67 per cent), on the Bombay Stock Exchange at the close of trading today.