KG D6 Savings

During the first round of NELP in 1999, the 7,645 square-km KG-DWN 98/3 block, also referred as KG D-6, was awarded to a consortium of Reliance Industries (RIL) and its Canada-based partner Niko Resources. RIL is operator in the block with 90% stake in the field while Nikko is the minority stakeholder with remaining 10%. The consortium was granted mining lease for 20 years.

RIL made its famous gas discovery in KG-DWN 98/3 block in the year 2002, which was also the largest gas discovery of that year globally.

Investment:

Total project cost is estimated at $9.5 billion over the life of the field in two phases. RIL has made an investment of $5.2 billion during the first phase of the development plan of D-6 block. In the second phase, the company proposes to make an investment of $4.3 billion through the life of field to sustain the plateau production i.e 1 tcf per annum.

Government shares from KG D6 basin at $2.34 and $ 4.2/mmbtu

At $4.2/mmbtu, DGH estimates Government take would be around $16.1 billion over the ten-year life of the field, which includes $2.0 billion in the form of Royalty, $9.1 billion Profit Petroleum and $5.5 billion in the form of income tax.

At $2.34/mmbtu, DGH estimates that Government take would be around $4.9 billion over the ten-year life of the field, which includes $1.1billion in the form of Royalty, $1.0 billion Profit Petroleum and $2.8 billion in the form of income tax.

Outcome

• The Government's share of profit petroleum varies from 10% to 85% which primarily depends on the profitability from the block. Higher profitability leads to higher share to the Government. Hence, at gas price of $4.2/mmbtu, the average share of profit petroleum to the Government works out to 35% over the life of the field, while at gas price of $2.34/mmbtu, this share drops to 11%.

• Government is expected to cumulatively make USD$ 16.5 bn at $4.2/mmbtu while at 2.3/mmbtu it is expected to make just $USD 4.9 bn which is nearly 228% less ( Royalty+Tax+Profit Petroleum)

source:DGH
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