- Finmin okays proposal to hike Reliance Industries gas priceTCS, ITC shares top wealth creators over 5 yrs, Reliance Industries lead loser: OswalFive blue-chip firms lose Rs 22,582 crore in market capitalisation, ONGC share price lead loserNatural gas: Reliance Industries under spotlight as FinMin wants cap on price hikes to protect consumers
RELIANCE Industries (RIL) has decided not to bid for oil and gas blocks in the 10th round of the New Exploration Licensing Policy (NELP), reports Promit Mukherjee in Mumbai. The firm is reluctant to explore and drill further in the absence of a market-driven pricing policy for gas.
With much of the drilling to be done in deep-water blocks, senior RIL officials say the costs are high and add that it is risky to make additional spends till there is more certainty on gas pricing. “To find substantial gas reserves, deep-water drilling is the only option,” an RIL official said. RIL’s apprehensions stem from the fact that the formula for arriving at the price of gas, as proposed by the Rangarajan Committee, will not result in a market-related price. The committee has suggested a formula that takes into account the average of the imported price of LNG into India and the weighted average benchmark prices in North America, Europe and Japan. RIL officials say it costs R700 crore to develop one deep-water well.
Cairn India — India’s biggest private sector crude oil explorer — and ONGC are, however, keen to participate. P Elango, CEO, Cairn India said: “For us, the policy has been conducive and we will keenly look at the NELP X round.” Sudhir Vasudeva, chairman, ONGC, is confident that the government will resolve any issues relating to policy uncertainty. “It is not mandatory for us to participate in NELP and we will do so only if the blocks on offer have good prospects,” Vasudeva told FE.
Going by current price trends, globally, the Rangarajan formula would throw up a price of $8.4 mmBtu (million metric British thermal units). However, RIL believes a market-linked price should be arrived at “by the producer floating tenders and calling for bids.” RIL is non-committal on whether whether a price of $8.4 mmBtu would be remunerative enough for it to invest.
Analysts estimate a minimum price of $10 mmBtu might be needed to ensure an assured internal rate of return (IRR) of 30%. A presentation by IHS CERA, a US-based independent energy research firm, says