Stimulus 3: RIL gas to start flowing in a few hours

01 April 2009

The Indian economy will get its third dose of stimulus when natural gas starts flowing from Reliance Industries' prolific KG-D6 block in the Krishna-Godavari basin fields in the east coast, transforming India's energy landscape.

Gas should start flowing from the block as early as tomorrow, according to sources close to the developments. Initial gas production will be around 10 mmcmd, rising by same volume every month till it reaches 40 mmcmd by July-end.

Reliance gas will not only help boost power supply from idle electricity generators and produce cheaper urea for agriculture, it will also give the government $28 billion (Rs1,40,000 crore) in profit share and royalty over the life of the field.

KG-D6 gas will replace about 7 per cent of the oil consumption of Asia's third largest oil consumer in 2009-10, rising to 14 per cent in the following three years, Goldman Sachs said in a report.

Besides, it would also reduce India's current account and fiscal deficits and support economic growth. ''All else being equal, the current account deficit could improve by 0.2 per cent of GDP in 2009-10, and progressively higher to an average improvement of 0.6 per cent of GDP in 2010-11 to 2013-14," the report said.

At peak output of 80 million cubic meters per day, the $8.84 billion (Rs44,175 crore) project will double domestic natural gas production by 2010. It will wipe out fuel deficit at urea making fertiliser plants and meet half of the 36 mmcmd gas shortfall in power plants.