RIL's KG-D6 has 80% less reserves than estimated: Niko

Reliance Industries' flagging KG-D6 gas block holds 80 percent less reserves than previously estimated, the firm's junior partner Niko Resources of Canada said on Thursday.

New Delhi: Reliance Industries' flagging KG-D6 block holds 80 percent less natural gas reserves than previously estimated, the firm's junior partner Niko Resources of Canada said, sending the company's stock tumbling.

Niko, which owns a 10 percent stake in the KG-D6 block off the east coast, said proved plus probable (2P) reserves at Krishna Godavari basin D6 block has decreased to 1.93 Trillion cubic feet from its previous estimate of 9.65-9.9 Tcf.

Originally, RIL had put 2P reserves at Dhirubhai 1 and 3 (D1&D3) fields in the KG-D6 block at 5.32 Tcf in the November 2004 initial field development plan. It had subsequently in 2006 scaled up the reserves to 11.3 Tcf and cited higher gas volumes for rise in capital expenditure to USD 8.8 billion from the earlier USD 2.4 billion.

RIL, which is the operator of the deepwater block with 60 percent stake, did not offer any comments. UK's BP plc owns the remaining 30 percent interest.

RIL shares fell 2.58 percent to close at Rs 718.60 on the Bombay Stock Exchange (BSE) Thursday.

In its 'Reserves and Contingent Resources Update', the Canadian oil and gas producer said total proved plus probable natural gas reserves in its various blocks have fallen almost 51 percent to 377 billion cubic feet equivalent (bcfe) mainly due to lower reserves in KG-D6.

"The reason for the decline in reserves referred to above relates to the D6 block. Proved plus probable reserves at D6 as at March 31, 2012 have reduced to 193 bcfe," it said in a statement.

The 7,645 sq km KG-D6 Block has 19 oil and gas discoveries. Of these, production from the MA oil find began in September 2008 and from the Dhirubhai 1 and 3 (D1&D3) gas discoveries in April 2009.

Natural gas output at KG-D6 fields has dipped to 31.33 million standard cubic meters per day this month after hitting a peak of 61.5 mmscmd in June 2010. RIL had in 2006 stated that output would rise to 80 mmscmd by 2012-13.

Production is further slated to drop to 28 mmcmd this fiscal and to 20 mmscmd in 2012-13, Oil Minister S Jaipal Reddy had informed Parliament last month.

Niko said the government was "considering increasing price" of KG-D6 gas for 2012-13 and 2013-14.

The government had set USD 4.205 per million British thermal unit as the price of gas from KG-D6 block for first five years of production ie up to March 31, 2014.

"A price increase during these periods to USD 8.00 per mmBtu net would increase NPV10 (after tax net present value, discounted at 10 percent) to approximately USD 15.89 per share" from USD 674 million or USD 13.05 per share at current gas price, Niko said.