Indian gas-price hike to lift KG D6 work

The government of India has approved an increase the price of natural gas sold domestically that will improve economics of development planned around deepwater KG D6 gas field off the country’s southeastern coast.

According to a partner in the D6 block, Niko Resources Ltd. of Calgary, a formula approved by the Cabinet Committee of Economic Affairs (CCEA) yields a gas price on Apr. 1, 2014, around $8.40/MMbtu, double the current price for gas sales from the block.

Reliance Industries Ltd., which operates the block with a 60% interest, along with BP, 30%, and Niko, 10%, announced plans earlier this year to invest $5 billion over 3-5 years to further develop KG D6 field, production from which has been disappointing.

The group had been under political pressure to increase drilling but insisted the problems related to reservoir complexity rather than well count (see figure, OGJ, Apr. 1, 2013, p. 62). Before announcing the investment plan, RIL had sought international arbitration to settle the controversy.

On June 28, the CCEA approved a recommendation for a new gas-price formula by a group chaired by C. Rangarajan studying India’s production sharing contracts (OGJ Online, Apr. 23, 2013).

The formula, applicable for 5 years beginning on Apr. 1, 2014, is based on the average of prices of Indian LNG imports and the weighted average of gas prices in North America, Europe, and Japan.

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