RIL Stand to Benefit by Gas Price Hike from Sep 2017

Reliance Industries Limited (RIL) has found new natural gas and oil fields on its eastern coast offshore store in Krishna-Godavari river basins in the Bay of Bengal. However, the top-most private energy giant of the country will start reaping the benefit of doubling of natural gas prices only from September 2017 after these newer fields get operational.

The company will soon get complete approvals to bring its 16 discoveries in the KG-D6 block and another 6 in NEC-25 blocks near Orissa into production. The current production is of 85 million standard cubic metres per day from the fields contribute about 12-13 percent to the total domestic production of the country. Once the approvals for the complete production come for RIL, these new discoveries will add a minimum of 30 mmscmd of output to the total production from D1 and D3 fields in the KG basin block. RIL is preparing an integrated development plan to submit to DGH for approval.

The Cabinet Committee of Economic Affairs (CCEA) approved a new pricing formula based on the average of the prices of imported liquefied natural gas (LNG) into India and the weighted average of gas prices in North America, Europe and Japan. This formula will be effective on April 1, 2014 for a period of five years, with the price being revised quarterly.

The price was also indicated in the Annexure that the Oil Ministry attached to the main Cabinet note on pricing of domestic gas as per a formula suggested by the Rangrajan panel. This hike in price will help monetize discoveries which are not able viable at current rates. The windfall gain for RIL will begin from 2017-18 once the gas flow from the new fields starts. The Ministry stated in a statement, “The present price of USD per mmBtu has not been found to be feasible and the Ministry is not approving the development plan for the lack of commercial viability. Around 3 trillion cubic feet of gas reserve is waiting to be exploited.”

The gas price hike will lead to higher gas production and will take India nearer to energy sufficiency. According to a recent announcement made by Petroleum ministry M.Veerapa Moily said ,” We are working with a programme that by 2020, 50 percent of import of petroleum should be stopped and 75 percent imports should be stopped 2025. By 2030, the country must become self sufficient in petroleum.”

Mukesh Ambani, head of RIL, in the annual general meeting also stated that RIL aspired to reduce the country’s dependency on energy imports. The company is striving to optimize its resources to make India import-independent.



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