May 1: The model submitted to the petroleum ministry assumes the following:
8Overall project life of 13 years has been assumed. Out of this, project has been in operation for four financial years. It has been attempted to incorporate four years of historical data into the model.
8The current set of discoveries which are already under exploitation have been assumed to have a life of nine years. These are modeled to produce at the rate of 15 mmscmd for another five years, including the current fiscal.
8The new set of discoveries for which capex outlay has been planned from next fiscal onwards, are assumed to yield a life of just five years. These are modeled to produce at the rate of 60 mmscmd from 9th year of the project life cycle. This is based on a reserve estimate of approximately ~ 4.0 TCF monetized over a period of five years.
8A capex outlay of $5 billion has been assumed starting from next year, 2014-15.
Comment: The background papers makes out a case for raising the price of gas to $8/mmbtu but then sustaining this rate for the subsequent years. The argument is that there is enough money to be made at this price of gas. However, according to RIL-BP sources, the gas output of 60 mmscmd from the new discoveries in the D-6 block is too optimistic, based on 4 tcf of gas. Clearly, the BP-RIL combine is looking for a higher price of gas, of around $10-$12/mmbtu. This will ensure a higher take home for the duo.
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