K-G gas output not before Dec

Delay in sourcing of equipment is the prime reason for the missed deadline.

Gas production from the country's richest field - operated by Reliance Industries in the Krishna-Godavari basin - will "not begin before December 2008", missing its earlier deadline of June 2008.

"The missed deadline is primarily due to delays in sourcing of equipment for the project from a few of the 55 countries from where we are importing. The delay is purely due to non-availability of resources," said a senior company official.

There are also close to 135 different contracts spread over 165 vendors for the mammoth project aimed at pumping out gas from the company's D6 block in the basin.

Analysts say RIL not being permitted to sign any gas sales agreement with customers of the gas is another reason for the delay.

The Bombay High Court, following an appeal by Anil Ambani-promoted Reliance Natural Resources, has prevented RIL from entering into any sales contract with customers.

A six-month delay in production means revenue of $800 million will be pushed back by six months, assuming a production rate of 40 million cubic metres per day (mcmd), according to a consultant who tracks the company.

At peak production, the D6 block will reach a rate of 80 mcmd, which will double the current gas availability in the country.

A company spokesperson, however, said that the deadline of June 2008 still stands. "We want to do a safe job. We are slowly but surely working towards the deadline," the spokesperson said.

Chairman Mukesh Ambani last week said that gas production would start in the second half of the 2008-09 financial year.

Equity Research firms such as Angel Broking have factored in the gas from the D6 block coming in the October-December quarter of the 2008-09 financial year.

"Without giving a fixed date, the RIL management has said that the production will begin only after October 2008. We have factored that in," Rohit Nagraj research analyst at Angel Broking said.

RIL is spending close to $5.2 billion in developing the D6 block, which lies around 30 nautical miles in the deepwaters off the coast of Kakinada in Andhra Pradesh.

It is also spending nearly $4 billion on laying a pipeline to transport the gas across the country to Gujarat. RIL is also building an onshore terminal near Kakinada to receive and process the offshore gas at an investment of around $2.5 billion.

"The completion of all of these projects have to coincide for gas production to begin, which is not likely to take place before December this year," the RIL official said.

The Prime Minister's Office is also monitoring the entire gas development and production project.

An analyst with a global advisory firm said that the delay will adversely affect a gas-starved India. Power and fertiliser plants across the country, including around 1,500 mw of idle capacity in Andhra Pradesh itself, is waiting for the gas.

Oil from D6 RIL will, however, start producing around 50,000 barrels of crude oil from the D6 block by March-end this year. Floating production, storage and offloading vessels (FPSOs) will arrive in the area by then, "which will allow us to begin production."

Oil production is likely to be boosted to around 100,000 barrels over a period of time. The country currently produces around 680,000 barrels a day .

Production of crude oil does not require the onshore receiving terminal to be completed as the oil will be loaded into the FPSOs and transported to refineries across the country.