Gas price delay costs Reliance Industries Limited $4 billion

New Delhi:  With the oil ministry indicating that a new gas price may be delayed by a quarter, Reliance Industries has said the postponement may stall $4 billion of investment in KG-D6 block’s second-biggest gas field. RIL and partner BP plc of UK had completed front-end engineering design (FEED) for development of D-34 or R-Series gas field in the Krishna Godavari basin KG-D6 block in the Bay of Bengal. They had floated tenders for sourcing equipment and were on the verge of awarding contracts for long-lead items so as to begin work in the five-month weather window that will become available from November and deliver gas in 2017. “There is no clarity on what the gas price would be in the future, failing which all our current and future investment plans are in jeopardy,” the firms said.

In notes accompanying a press statement they issued announcing the slapping of an arbitration notice on the government for implementation of the gas price increase, RIL-BP said they were getting ready for first major investment that would have brought new gas in 2017. “The contractor group which was getting ready to sanction the  first major project with an investment of $4 billion in June/July 2014 is now forced to halt activities,” they said. Sources close to RIL said the project was the R-series field, which holds 2.2 trillion cubic feet of in place gas reserves. Of these, 1.191 tcf are recoverable with a peak output of 12.9 million standard cubic metre per day.