Trouble for Energy Firms in India's KG Basin

Energy companies involved in drilling gas in India’s Krishna-Godavari Basin face mounting trouble because of uncertain government policy and quantity of gas that can be extracted, a report in Economic Times said.

Not only Reliance Industries, state run ONGC and Gujarat State Petroleum Corp have also struggled in the region. Reliance's output has fallen to about 34 mmscmd instead of rising to 80 mmscmd, and the company has been pulled up by authorities.

Economic Times said in the same report that ONGC's GS-15 field in the KG Basin is producing barely 0.19 mmscmd of gas and 9,400 barrels of crude oil per day. ONGC was slated to start production from the GI block by July 2012, but now that could be delayed.

Another company that began its KG Basin story with a big-bang announcement is state-run Gujarat State Petroleum Corp. In 2005, Gujarat chief minister Narendra Modi said the company had discovered 20 trillion cubic feet (tcf) of reserves in the basin, or twice as much as RIL's two producing gas fields. Production was expected to start in 2007.

Five years after the expected start of production and several missed target dates - once because of a fishermen's agitation - GSPC hopes to start producing gas in July 2013, from scaled-down reserves of 2 tcf from a part of its block in the KG Basin. Its cost has risen from $1.6 billion to $2.3 billion.