Falling gas production from Reliance Industries’ KG-D6 fields has led the Maharashtra government to ask the Centre to take over the wells and declare those as national assets.
The state has resorted to this move as it fears that a continuing decline in gas production would severely affect power generation at Ratnagiri Gas and Power Pvt Ltd (RGPPL)’s plant, formerly Dabhol power project, which depends on the D6 wells for gas.
A senior official of Maharashtra State Electricity Distribution Co had said reduction in power supply from the Ratnagiri project had led to a rise in mismatch between demand and supply.
The Maharashtra government’s plea came up for discussion during a recent meeting between the state Energy Minister Ajit Pawar and Union Petroleum Minister S Jaipal Reddy.
“The government is seriously concerned over the drastic fall in the power generation for want of fuel from the former Dabhol power project. The generation has fallen to 550 Mw against the total capacity of 1,967 Mw. Of the requirement of 8.5 million standard cubic metres per day (mscmd), nearly 7.6 mscmd was to come from KG-D6 basin. However, the gas flow is continuously slowing and now it stands at 2.3 to 2.6 mscmd,” a senior state government official, who did not want to be named, told Business Standard.
“The government has, therefore, appealed to the Centre to take over the project and declare it as a national asset. This will help increase necessary investments in the KG-D6 gas fields and thereby boost production,” the official added. The official recalled that the Centre has already indicated KG D6 gas price, which is currently at $4.2 per million British thermal unit fixed by the empowered group of ministers, would be revised only in 2014.
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An August 16 report by investment bank Goldman Sachs had noted that RIL could double its market value to around $100 billion by 2017 if the government raises the price of KG-D6 gas to $8 per unit from the current $4.2. The firm has been lobbying for a price increase.
The projected output at KG-D6 was 80 mscmd, which it should have achieved by now. However, production peaked at 61.5 mscmd in March 2010 and has fallen to around 29 mscmd. Further, Goldman had said it expects RIL to increase gas production to 50 mscmd by the year ending March 2017, as new reserves start giving gas.
RGPPL had said if the shortage in gas supply falls further, the company would be in the red by the end of the current financial year.
Ratnagiri Gas, which was formed in 2005 and revived the project in April 2006, had clocked a net profit of Rs 450 crore on a turnover of Rs 4,499 crore in 2011-12. The company had for the first time paid dividend of Rs 123 crore for the last financial year.