RIL hikes gas spend by Rs 10k cr

Company submits new plan to DGH, awaits nod.

Reliance Industries (RIL), the country's largest company by market capitalisation, is planning to spend an additional Rs 10,000 crore to produce natural gas from discoveries that were not a part of the original development plan in the Krishna-Godavari (KG) basin, according to sources close to the development.

The company has already received an approval to spend Rs 50,000 crore for commercialising two of its biggest gas discoveries in the D6 block located in the KG basin.

"In a letter to oil regulator Directorate General of Hydrocarbons (DGH), the company has submitted one more development plan for Rs 10,000 crore as additional capex (capital expenditure) for the block. With this, the total capex will go up to Rs 60,000 crore. The plan is yet to get a final approval from DGH and the ministry of petroleum and natural gas," said a source, who had seen the RIL letter. RIL currently owns a 90 per cent stake in the KG basin's D6 block, where 18 oil and gas discoveries have been reported till date. The remaining stake is with Niko Resources of Canada.

The new plan submitted to DGH is for development of eight discoveries, which will be linked to the existing infrastructure the company has put up for producing gas from its two previous discoveries (D1 and D3) in the D6 block of the KG basin, said another source close to the development plan. However, he refused to divulge the investment that is proposed to be made.

RIL officials refused to comment on the development. When contacted, Director General of Hydrocarbons V K Sibal declined to comment.

The billionaire Mukesh Ambani-controlled entity had submitted an initial development plan of Rs 10,000 crore ($2.47 billion) to produce 40 million metric standard cubic metres a day (MMSCMD) of gas in 2004. After 10 months of detailed study and review, the plan was finally approved by DGH and the ministry.

In 2006, RIL revised its initial plan, citing doubling of production to 80 MMSCMD from 40 MMSCMD, which requires double the capex. Later in 2006, the company again revised its plan and requested for an approval of over Rs 40,000 ($9.08 billion), citing an increase in the production cost. A few months later, the company once again got an approval for an additional capital expenditure of around Rs 10,000 crore ($2.23 billion) for an additional gas production of 9 MMSCMD.

With this, the capex for KG D6 had become Rs 50,000 crore ($11.3 billion).

The ministry and DGH are expected to discuss the cost escalation as it would restrict the revenue of the government.