Shares in Indian energy major Reliance Industries fell more than 4 percent early on Friday after a report said its gas output from the Krishna-Godavari basin, off India's east coast, may decline.

Reliance has estimated that gas sales from D1 and D3 fields in the block off India's east coast may be as low as 38 million standard cubic meters a day (mscmd) during the 2012/13 fiscal year, industry portal Indian Petro reported, citing a letter the company wrote to the upstream sector regulator.

The current rate of output from D1 and D3 is 42-43 mscmd. A Reliance spokesman declined to comment. Officials at the Directorate General of Hydrocarbons did not respond to calls.

A source with knowledge of the communication said the letter was written last week, adding Reliance has said output from the D1 and D3 fields may decline to 38 mscmd in 2012/13, although output from MA1 will remain steady around 8-9 mscmd.

"This is the reason why the company joined hands with BP.  It is extremely complicated reservoir, much more complicated then it was thought to be in the beginning," the source said.

Last month, Reliance sold stake in 23 oil and gas blocks in the basin to BP in a $7.2 billion deal, in part to benefit  from BP's technical expertise in deepwater exploration.

The Indian energy giant posted its highest-ever quarterly profit in January as refining margins surged, but concerns over the group's gas production have for months dampened the growth outlook for the company.

Reliance is currently pumping less than the 60 mscmd it produced last year, and far lower than its peak capacity of 80 mscmd.

Earlier this month, India's upstream regulator said Reliance Industries' gas output could go up to 67 mscmd by April, if it drills four more wells by next month to raise output.

"It looks like Reliance is trying to push for increasing the capex. The fears of a decline in output are only a possible scenario. It looks like the market has overreacted,"said Deven Choksey, managing director at Mumbai's KR Choksey Shares & Securities.