UPDATE 1-India's Reliance says KG gas output at 28 mmscmd

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NEW DELHI, June 25 (Reuters) - Reliance Industries Ltd's (RELI.BO) gas production from its deep-sea field off India's east coast is below capacity as supply agreements with some buyers still need to be finalised, a senior company official said.

The firm is producing 28 million standard cubic metres a day (mmscmd) of gas from its field in Krishna Godavari Basin compared to a production capacity of 37 mmscmd, said P.M.S. Prasad, chief executive of Reliance's Oil and Gas business on Thursday.

He said Reliance may produce 40 mmscmd by July.

"We need to get more linkages to produce more," he told reporters.

The gas supply contract with state-run power generator NTPC (NTPC.BO) was yet to be finalised. Further, the HBJ Pipeline that supplies NTPC plants which have been allocated the gas was full, Prasad said.

The HBJ pipeline, which connects Hazira on the west coast to markets in norththern India and northwestern India, is part of state-run gas transporter GAIL India's (GAIL.BO) network.

Reliance began pumping gas from the field in April and expects to reach peak production capacity of 80 mmscmd by the end of the year, which would double the country's natural gas output.

While several customers are keen to buy the gas, which is in short supply in Asia's third-largest oil consumer, the firm needs to firm up supply agreements with some customers selected by the federal government.

Prasad said Reliance was still evaluating its options on a court ruling that asked it to supply gas at almost half the price of an interim ruling to former group firm Reliance Natural Resources (RENR.BO) [ID:nBOM433343].

Reliance Industries is controlled by billionaire Mukesh Ambani and Reliance Natural Resources is headed by his estranged younger brother Anil.

It would be too premature to comment and the firm had time till July 15 to respond, Prasad said.

Reliance shares ended 2 percent lower at 1,959.50 rupees in a Mumbai market that slipped 0.5 percent. (Reporting by Nidhi Verma; Editing by John Mair)