D6 'wait' on gas price hike

Restraining investment: D6 block partners

India's Reliance Industries and its partners in the D6 licence off the country will not be making further investments in development projects in the deep-water block until gas prices are raised by the New Delhi government, according to Canadian partner Niko Resources.

"The company and its partners will not make investments in planned development projects without achieving the pricing as provided in the PSC [production sharing contract] to provide adequate returns on the investments," Niko said in its latest quarterly result on 14 August.

More than $10 billion of investments are said to be at stake in the gas-rich D6 block in the Krishna Godavari basin, involving the R-series, D-55 and various other satellite discoveries.

Niko said that it is disappointed with the delays associated with gas pricing.

"While the company is disappointed with the lack of progress on the Indian gas price issue, it has continued to execute on its strategy, " Niko stated.

India had been planning to almost double domestic gas prices to over $8 per million British thermal units (Btu) from April this year.

However, in spite of giving notification of the higher gas prices in January, the Indian government deferred its implementation on two occasions.

The new Bharatiya Janata Party (BJP) government led by Prime Minister Narendra Modi has now deferred the gas price hike to October so that it can decide on a new gas pricing formula.

Reliance and its block partners UK-based BP and Niko presently get about $4.2 per million Btu for the gas being produced from D6.

However, industry sources suggest that the BJP led government could settle for a gas price between $6 per million Btu to $7 per million Btu when a decision is taken later this year.

A high-level committee headed by former power minister Suresh Prabhu is examining the earlier gas pricing formula formulated by the previous United Progressive Alliance government. The new panel is likely to finalise the new gas pricing formula by next month.

Reliance is the operator of the D6 block with a 60% stake. BP has 30% while the remaining 10% stake is held by Niko.

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