Reliance Industries (RIL) has said that developing smaller gas fields in the KG-D6 block is economically unviable at the current price of $4.20 per mmBtu and it may seek a rate of at least $6 per mmBtu in 2014, when the fields are put into production.
RIL has made 18 gas finds in the eastern offshore KG-D6 block, of which two -- Dhirubhai-1 and 3 -- were put into production from April, 2009, at a cost of $8.836 billion.
It is working on an integrated development plan for the rest, but wants a price higher than the $4.2 per million British thermal unit rate paid for gas from Dhirubhai-1 and 3.
"It is absolutely not viable (to develop smaller fields adjoining Dhirubhai-1 and 3 fields in KG-D6 block) at current prices," RIL Executive Director P M S Prasad told PTI here.
The smaller fields are proposed to be developed as a common pool, using existing facilities of the Dhirubhai-1 and 3 fields and RIL was in the process of preparing a multi-billion dollar integrated development plan, he said.
RIL had in 2008 submitted plans to the government to invest $5.91 billion to develop nine satellite fields, but last year pruned the list to just four, as the current gas price of $4.2 per mmBtu did not justify such a huge investment.
The amended $1.5 billion development plan for the four fields is being withdrawn and a new integrated plan will be submitted, he said.
The fields would start producing in 2014, the same year when the existing price of $4.20 per mmBtu expires. The government had in September, 2007, approved $4.205 per mmBtu as the price of gas from Dhirubhai-1 and 3 for five years, which was to be reviewed at the end of this period.
Though Prasad refused to speculate on what price RIL would seek for marginal fields and the revised rates for fields currently under production, sources in the know said that $6-7 per mmBtu is the rate RIL may be looking at.
In all likelihood, RIL may go in for a common rate for both sets of fields (current as well as small ones).
"I cannot say what will be the price discovery then (2014), but our economics tell us that they (smaller fields) are not viable at current prices," Prasad said.
Under the Production Sharing Contract (PSC), RIL has to discover the price the market is willing to pay and submit it to the government for approval. The government may approve it as it is, or do it with minor changes, or even reject it.
It will take 4-5 years to bring these fields into production and may help RIL extend the 80 million cubic metres per day peak output envisaged from KG-D6. Peak output from the Dhirubhai-1 and 3 fields is envisaged for five years.