Reliance doubles gas estimates, to raise $2 bn

Reliance Industries has almost doubled its estimated gas reserves at D6 block in the Krishna-Godavari basin to 11.3 trillion cubic feet, from the earlier 6 trillion cubic feet.

The company has also more than doubled the estimated expenditure on bringing the gas onshore to $5.2 billion from an earlier estimate of $2 billion.

The company has informed the Bombay Stock Exchange that its board will consider a proposal to raise additional debt of $2 billion in the domestic and foreign markets for accelerating oil exploration and production activities.

Based on its revised estimates of gas reserves, Reliance Industries has sought an approval from the Directorate General of Hydrocarbons, the upstream oil regulator in the country, to double production from 40 million standard cubic metres per day (mmscmd) to 80 mmscmd at the D6 block.

A production rate of 80 mmscmd is equivalent to 450,000 barrels of oil equivalent per day, which is a quarter of the country's current oil import.

"With the doubling of reserves, production will be higher and so will capital expenditure. Reliance has submitted a revised development plan, which we will approve in a few weeks, after validating it," Director-General of Hydrocarbons VK Sibal said. First gas from the project is expected by the second half 2008-09.

A part of the $2-billion debt may be used to finance the enhanced production rates.

The balance is likely to be funded through internal accruals and further borrowings. Reliance Industries' total debt was 44 per cent of its equity on March 31, 2006, according to the company's annual report.

Today's announcements came on the back of the fire at Reliance Industries' Jamnagar refinery last week and its less than expected performance last quarter, when it reported falling refining margins. Margins fell from $11 per barrel to $9.1, year on year basis for the September quarter. The company had reported 9.1 per cent growth in net profit to Rs 2,709 crore for the quarter.

In June, Niko Resources, Reliance's partner in the block, had increased its estimates of natural gas reserves by 197 per cent to 35.4 trillion cubic feet. In September the company had notified the Director-General of Hydrocarbons of another discovery, whose potential commercial interest of the said discovery is yet to be established.

The company has began repairs at the burnt desulphurisation unit at the Jamnagar refinery last week.

"The repair work at the unit has started and will be completed soon," sources close to the company said" The insurance company team is yet to visit the accident site. The company's share was up 3.1 per cent today on the Bombay Stock Exchange.