RIL has $12 bn for gas find, transport

$5.2bn will be spent on gas production, while a larger chunk of $7bn on building gas pipes.

Reliance Industries is lining up investments of over $12 billion for production of gas from its fields in the Krishna-Godavari basin and its transport to consumers across the country.

While $5.2 billion will be spent on bringing the gas to production, a larger chunk of $7 billion will be invested in building gas pipes to transport it to consuming locations.

Production of gas from the K-G basin will begin by June 2008, the company's president (oil and gas), PMS Prasad, told reporters.

There are three key pipelines that are being planned by the Mukesh Ambani-controlled company from Kakinada in Andhra Pradesh "" a 1,386-km pipeline to Bharuch in Gujarat at an investment of $4 billion, and two coastal pipelines to West Bengal and Chennai at an investment of $3-3.5 billion.

The Mumbai-based company has already signed contracts worth $4.5 billion with suppliers of pipes, machinery and pumping equipment, out of the planned $5.2 billion investment in production of gas, Prasad told reporters.

The investment plan raises Mukesh Ambani's expenditure in his oil, gas, refining, chemical and retail businesses to over $28 billion by 2011.

Reliance plans to borrow $2 billion from overseas banks and investors to develop the gas field and will fund the rest out of its internal resources, Prasad was quoted by agencies as saying.

The company is especially bullish on city gas networks, where its advantage over competitors would be a captive supply of gas. The company intends to set up gas networks in hundreds of towns across the country.

Currently, only a handful of cities have access to piped gas, since India is a gas deficit country with domestic production meeting only half the country's needs. The largest users of gas at present are power and fertiliser units. "The gas from the K-G basin "" Reliance's and others like ONGC's and GSPC's "" would go a long way in meeting the country's demand," an analyst said.

Gas consumption may rise to 400 million cubic metres a day by 2025 if the economy grows at the projected rate of 8 per cent a year. At present, there is a demand of 170 million cubic metres a day, while supply stands at 93 million cubic metres a day.

Officially, the KG-field of Reliance, discovered in 2002, is projected to produce 80 million cubic metres a day. However, with the recent new discoveries there, the production could go up to 100 million cubic metres a day, R P Sharma, president of the LNG business of the company told Business Standard recently.

Reliance shares rose 1.09 per cent to Rs 1,314 on the Bombay Stock Exchange today. The stock has gained 70 per cent in the past year, valuing Reliance at $41.6 billion.