Reliance Industries (RIL) is losing over $120 million in revenues every month on being forced to produce natural gas less than capacity as the government is yet to name buyers for the fuel beyond the initial volumes.
RIL's KG-D6 fields, lying 40 miles off the coast from here, can produce around 64 million standard cubic metres per day (mmscmd) from 10 wells in operation but the firm is being forced to keep output at 36-37 mmscmd as the government has not yet named customers for volumes beyond the initial 40 mmscmd, company's Executive Director P M S Prasad told reporters here.
The company has completed four more wells but has not put them into production. Another four wells would be completed in the next few weeks, enabling the company to hit peak output of 80 mmscmd.
"We had taken around Rs 28,000 crore of debt for developing the D1/D3 (first two of the 18 gas finds in the Block KG-DWN-98/3 or KG-D6). We would have liked to sell all the gas we can produce so that we can pre-pay our debt and cut interest cost," he said.
The government has till now allocated 15.1 mmscmd of KG-D6 gas to fertiliser units, 3 mmscmd to LPG plants, 18 mmscmd to power firms, 0.83 mmscmd to city gas projects and 3.75 mmscmd to steel plants. Of this firm allocations, customers like NTPC, Dabhol and Essar Power are yet to draw 6.95 mmscmd gas.
"It is not that there is no demand for gas. More than two dozen customers in power, steel, float glass, ceramic and refinery sector have approached us seeking 84-85 mmscmd gas," he said.
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"Unfortunately, we cannot sell gas to them directly" unless the government names the customers under its Gas Utilisation Policy.
Prasad said some may argue that since the gas can be produced in future, RIL was only faced with deferred revenues.
"But if you calculate the difference between what we could have realized now and the net present value of the future revenues, we stand to lose $17-18 million a month. On top of it, the interest cost that we pay on our debt."
The deferred revenues was "affecting" RIL's plans to prepay the loans and cut interest costs. "We would have liked to pay the loans quicker but we cannot and that is increasing our interest costs. We will service the debt, not default on it."
RIL is to invest $8.836 billion in KG-D6 over the 11-year life of the field and till now it has spent about $5.8 billion, Prasad said.
Petroleum Minister Murli Deora had last month asked the Prime Minister to form a new Empowered Group of Ministers (EGoM) to decide on additional allocation of natural gas from KG-D6 fields but the panel is yet to be constituted.