Reliance's gas worth Rs 8.4 lakh cr

Gas reserves in Reliance Industries' (RIL) D6 block in Krishna-Godavari basin may be four times the earlier estimates. According to a government source, total gas reserves in the D6 block are in the range of 40 trillion cubic feet, worth $168 billion (Rs 8.4 lakh crore) as per valuation approved by the government. That's17% of India's GDP and 3.2 times the total value of all RIL shares -- Rs 2.6 lakh crore. RIL's partner, Canadian firm Niko Resources, had suggested in 2007 that the reserves were much higher than the 11 trillion cubic feet claimed by the Indian firm. However, neither RIL nor the government had confirmed or denied the suggestion made in Niko's annual report for the year 2006. Meanwhile, the Director General of Hydrocarbons (DGH), the authority in charge of scrutinising RIL's expenditure accounts, has said that the company, along with consortium partner Niko, has put forward a plan to spend $5.9 billion to develop two fields adjacent to the ones that went into production on Wednesday. "The development (plan) covering 9 satellite discoveries was submitted to the management committee (by RIL) in July 2008... we have not yet taken a view," V K Sibal, the DGH, said. Five other discoveries are under appraisal phase, which may take three more years, Sibal added. RIL's returns from the discoveries are tied to the expenditure that gets approved as it gets to keep a certain multiple of the amount it spent, once the production starts. An RIL spokesperson refused to comment on the issue of divergence in reserves estimates. The reserves are estimated by interpreting the results of the different seismic surveys conducted since 1999. "All our attention has been focused on starting production at the two fields," he said. Niko, when it announced a preliminary estimate of 36 trillion cubic feet in 2007, had based its finding on a new survey. "An independent study of the natural gas discovered to date in the D6 Block by Gaffney, Cline & Associates (GCA) was commissioned by the Company's partner, Reliance Industries Ltd, which resulted in a significant increase, almost 200%, in the estimate of original natural gas-in-place (OGIP) basis for estimation of reserves," Niko had said. Meanwhile, RIL officially confirmed that it had begun the production of gas at the only two fields for which development was complete. If all goes according to plan, RIL's profit, expected to be around Rs 15,000 crore for 2008-09, will get a boost of Rs 12,000 crore in the current year from the proceeds of the sale of gas. Besides improving RIL's finances, the gas production is expected to cut India's forex outflow as many dual-fuel industries can now switch to rupee-denominated RIL gas instead of using imported petroleum derivatives. Oil secretary RS Pandey said the gas will reduce dollar outflow by about 10% as RIL will be charging in rupees. "This will help accelerate India's industrial growth," Pandey told reporters. "This is the nation's biggest find in 30 years and we expect it to provide a big fillip to further investments to India's exploration plans." Total revenue from the Reliance field is expected at Rs 2.1 lakh crore ($42 billion) over its expected 11-year lifespan, he added.