Reliance Industries (RIL) is reaping the benefits of an increase in production from its oil and gas assets. The higher production from RIL-bp controlled Dhirubhai-6 (D6) block in the Krishna Godavari (KG) Basin will coincide with the government significantly hiking the price allowed for selling domestically produced natural gas, Business Standard reports.
RIL’s share of production from the KG-D6 basin sequentially rose by 18.4 per cent to 39.2 billion cubic feet equivalent (BCFe) during the quarter ending September 30 of the current financial year. This stood at 33.1 BCFe in April-June 2021. One BCF is equal to one million mmBtu.
There was nil production from this asset in July-September 2020. “Commissioning of R-Cluster and Satellite Fields in KG D6 block led to a turnaround in the oil and gas segment earnings,” RIL said in a presentation.
The gas produced from this asset, awarded under the New Exploration Licensing Policy (NELP) regime, is priced in line with a government approved formula instituted in March 2016. The KG-D6 asset is enlisted under the Deepwater, Ultra Deepwater, and High Pressure-High Temperature area (collectively called difficult discoveries) category. This allows RIL and bp marketing freedom including pricing freedom, subject to a ceiling price on the basis of landed price of alternative fuels.
Under this pricing regime, RIL-bp was allowed to sell natural gas produced from KG-D6 subject to a price ceiling of $3.62 per mmBtu during the first half of financial year 2021-22 (till September 30, 2021). This drove up RIL’s revenue from the oil and gas business sequentially by 28.3 per cent to Rs 1,644 crores in Q2FY22. These price hikes come on the back of global price movement. An unprecedented demand across the globe has led to a historic increase in gas prices, with most markers up three times (sequentially). According to RIL, a further increase is likely in the ceiling price applicable for KG-D6 gas buoyed by current high prices.