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India's Natural Gas Shortage Gets Relief From Reliance Output

Reliance Industries Ltd. may produce 50 percent more natural gas from India's biggest field than the company estimated, easing shortages that idled utilities in the world's second fastest-growing economy. The Krishna Godavari region in the Bay of Bengal may yield as much as 120 million cubic meters a day after eight new discoveries, V.K. Sibal, India's oil and gas regulator, said in an April 8 interview at his office outside New Delhi. The previous target for the field, scheduled to start production in the next 12 months, was 80 million cubic meters. Reliance, India's largest company by market value, is investing $5.2 billion to develop Krishna Godavari, which will more than double the country's output and may alleviate shortages that have shut down a third of the nation's gas-fired power plants. Demand may quadruple to 400 million cubic meters a day by 2025 if the economy expands at the government's projected annual rate of 7 to 8 percent, according to the Oil Ministry. ``Such finds may make explorers look at India as a country rich in hydrocarbons,'' said Jaspreet Singh, an associate vice president at Prabhudas Lilladher Securities in Mumbai. ``India needs to increase oil and gas output because fuel demand is rising and the supply gap is widening.'' Reliance profits almost doubled in the past three years on record earnings from processing crude oil into fuels. The Mumbai-based company intends to start production during the second half of the fiscal year that ends in March 2009, Chairman Mukesh Ambani said last year. Increasing Production ``I don't have any doubt that output from the east coast will keep on increasing,'' Sibal said in his office at the Directorate General of Hydocarbons in Noida. ``The cost of developing adjoining fields will be incremental because they are anyway putting in place infrastructure to bring gas from the biggest field onshore.'' Sibal said estimates for the increase are based on initial details provided by Reliance. ``We have not submitted a new development plan'' to Sibal's office, Reliance spokesman Paresh Chaudhry said in an e-mail. ``Any additional production approvals will be possible only on submission and evaluation of a development plan.'' India is auctioning rights for a record 57 gas-producing areas this year as the government contends with record crude oil prices while seeking to sustain annual economic growth of more than 8 percent. BG Group Plc, the U.K.'s third-biggest natural gas producer, and Santos Ltd., Australia's third-biggest oil and gas company, are among drillers that won rights to explore in India last year. The nation sold 165 areas in six previous rounds, yielding 49 oil and gas finds, Sibal said on Jan. 8. Record Oil, Gas Crude oil prices at a record $111 a barrel make it viable to bring smaller discoveries into production, Sibal said. U.S. natural gas futures for delivery at the Henry Hub in Louisiana rose 31 percent in the past year on the New York Mercantile Exchange. Fields adjoining Reliance's main discovery, called D-6, will be linked to pipes and booster stations being built to transport fuel from the field, Sibal said. ``On the basis of the infrastructure that is being put up, there is very little doubt that gas output from Reliance's fields will be more than has been talked about,'' said Deven Choksey, chief executive officer at Mumbai-based K.R. Choksey Shares & Securities, which manages $550 million for wealthy individuals. Natural gas prices may rise 50 percent within five years because producers including Russia and Nigeria, which hold almost half the world's gas, are curbing exports to meet growing domestic use, according to Chris Jarvis, president of Caprock Risk Management in Hampton Falls, New Hampshire. Increasing demand and lack of supplies forced Japan and South Korea to pay more than double the U.S. benchmark gas price for cargoes this winter from as far away as Trinidad, the biggest LNG supplier to the U.S. India plans to resume talks with Pakistan over a pipeline to transport gas from Iran after more than a decade of delays to meet rising demand, Oil Minister Murli Deora said on March 28