Reliance Industries' (RIL) prolific gas field in Bay of Bengal cannot sustain at a "lower" gas price of $2.40 per million British thermal unit (mmBtu), investor advisory firm Bernstein Energy has said in a report.
"At a lower gas price of $2.40 per mmBtu development of deep water gas would not be possible and would discourage deep water gas exploration, which we believe is critical for India's long-term energy security," US firm said in a July 30 report.
RIL is locked in a bitter gas supply dispute with a firm of Anil Ambani Group which is seeking fuel at $2.34 per mmBtu.
"Successful resolution to the gas pricing dispute is important for RIL and for the future of Indian deep water gas," it said. "While the gas dispute between the Ambani brothers continues to cast a shadow over the Dhirubhai gas development, we believe that the government is right to back a $4.20 per mmBtu gas price and that this price will prevail."
Bernstein Energy said deep water exploration off India's east coast has yielded one of the worlds largest deepwater gas discoveries over the past decade – Dhirubhai in block KG-D6. Following start up of this field in April, RIL has increased gas production by 1 billion cubic feet per day which equivalent to 25 per cent of India's total current gas production.
"Over the next three years production will ramp up to 2.8 billion cubic feet per day with further upside to 4.2 bcfpd following development of satellite discoveries in block KG-D6," it said.
The research firm put a further 60 trillion cubic feet in undiscovered gas reserves on top of the 35 Tcf that had been discovered since 2002.
Recent discoveries have confirmed that the Krishna Godavari, Mahanadi and Kavery basins are prospective. RIL and state-run Oil and Natural Gas Corp (ONGC) have taken dominant positions in the acreage along India's east coast and are investing heavily in search of the next major discovery.
"We believe that RIL has the best acreage and it is likely that another Dhirubhai sized gas field or two remains to be discovered. This could provide an upside of $23 billion in value to the stock," Bernstein said.
It said RIL is expected to announce development of additional field over the next two years which will be value accretive to the company. "These include the development of satellite discoveries around the Dhirubhai field in Block KG-D6 and shallow water gas in block KG-DIII."
Besides KG-D6, other blocks with RIL having great potential include NEC-25 in Mahanadi basin and D9 in KG Basin. ONGC's KG-DWN-98/2 block may also hold good potential, it said.
