News Detail

• According to sources, Reliance Industries Ltd (RIL) may now wait for the inclusion of British Petroleum (BP) in the KG-D6 production sharing contract before it looks to resolve the issue of the four wells. Currently production at these four wells has stopped due to high water ingress.Sources further said that RIL may have plans to utilise BP exploration expertise that will enable them to resolve the issue and start production from the four wells, and this can only happen once the government approves of BP as a player in the KG D6 block. It is interesting to note that it is going to be four months since the RIL-BP deal has been completed and the $7.2 billion transaction has taken place. In fact there may be a growing concern among BP management with this issue- that the company has made a payment of $7.2 billion in its entirety, yet it is not being allowed to operate. It also needs to be remembered that till BP gets included in the PSC, it will not be able to share the profit petroleum.
• Why is RIL so keen to include BP in the PSC?
• As per the past records, RIL has not been able to make a significant oil discovery, and KG D6, which is the largest gas discovery for the country till date, saw its production dipping to the levels of 40 mmscmd.This is noteworthy considering that when the PSC was initially signed, the impression was that RIL will be able to produce 80 mmscmd of gas, and the government had even allocated it accordingly. But interestingly, the highest level of production from this block has been only 61 mmscmd. Analysing all these developments together, it becomes very clear that with BP by its side now, RIL will like to make the utmost out of its expertise. RIL is also waiting to get BP to explore the rest of the four wells that are lying idle.
• Impact on production shortfall and pricing
• Pricing has always been an issue with RIL. For over a year now, RIL has been saying the price of $4.2 a unit, at which it is selling the KG D6 gas, is unviable and the company has been making consistent loss. It has been saying that this price is hardly helping the company to meet the capital cost. Currently, the global price of gas is hovering around $17 dollars in Asia, due to the incremental demand in Japan and Korea, while the depressed European markets are seeing natural gas prices around $9.In terms of production shortfall, till wells come into production and the last 4 wells are put to work, chances of increase in production level are minute.

Source