Stoutly defending the hike in gas prices, oil minister M Veerappa Moily has said the move will help bring to production over 3 Trillion cubic feet of gas reserves that had been declared economically unviable at current rates of $4.2.
Several gas discoveries of firms like Oil and Natural Gas Corp (ONGC) and Reliance Industries have been declared unviable by the directorate general of hydrocarbons (DGH) as current gas price of $4.2 per million British thermal unit was inadequate to cover the cost.
"Over 3 Tcf of gas discoveries are lying to be exploited. These have not been declared commercial by our own DGH as they cannot be monetised at a price of $4.2," Moily said.
The reserves in these discoveries equals the remaining resource base in the currently producing Dhirubhai-1 and 3 (D1&D3) gas fields in RIL's eastern offshore KG-D6 block.
The Cabinet Committee on Economic Affairs on June 27 approved pricing of domestically produced gas at an average of imported LNG and international benchmarks from April 1 next year. Accordingly, the price in April would be about $8.
The Minister said the option before the country was to either keep the finds in the ground and continue importing gas at $12-13 or pay much lesser price to domestic producers to bring the discoveries to production and cut foreign exchange outgo on imports.
Officials said the finds whose commerciality has not approved by DGH are spread over RIL's KG basin KG-D6 block and Cauvery basin block CY-DWN-2001/2 off the Tamil Nadu coast.
In KG-D6, commerciality of D-5 and 18 had not been submitted due to low gas price, Declaration of Commerciality (DoC) of D-29, 30 and 31, which hold around 350 billion cubic feet of reserves which can produce 5-7 million standard cubic meters per day, has not been approved by DGH.
Also, D-35 find in the Cauvery basin block CY-DWN-2001/2 holding 719 billion cubic feet of gas that could produce 4 mmsmcd of gas was declared commercially unaviable with DGH on May 14 stating that "at a gas price of $4.2/MMBtu, revenue generated is not adequate to meet the costs".
In RIL's NEC-OSN-97/2 (NEC-25) block, two finds D-32 and 40, holding 663 billion cubic feet of reserves capable of producing over 4 mmscmd, has not been entertained by DGH.
Similarly, ONGC's several of discoveries in KG-DWN-98/2 blocks, which holds at least 3.56 Tcf of reserves, are unviable at $4.2. Its 16 billion cubic meters MDW-4A and 5 finds in Mahanadi basin MN-DWN-98/3 block faces similar fate.
Macquarie Research in a note said, "A hike (in gas price) could boost India's recoverable gas reserves manifold" and quoted global consultants IHS-CERA to say that the nation's producible gas resources will rise to 80 Tcf at $8 gas price.