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Price cap for KG-D6 gas to rise in October: Reliance

Company expects the price cap for its KG-D6 gas sales to rise over the current $9.92 mmBtu

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Higher gas prices have boosted RIL’s Ebitda (pre-tax profit) from oil and gas exploration and production business to a seven-year high.

By Vikas Srivastava/ Agencies

Reliance Industries (RIL) expects natural gas from its KG-D6 basin to be extremely competitive in the coming months due to firm global gas prices as Europe tries to source gas from sources other than Russia.

Sanjay Roy, senior vice president (exploration and production) said on an analyst call that the company expects the price cap for its KG-D6 gas sales to rise over the current $9.92 per million British thermal units to double digits in the next price revision in October this year.

“Going forward, we expect ceiling prices to increase to $9.92 in the first half of current fiscal- that has been notified. We expect increases from there onwards in the second half of the year,” Roy said.

Higher gas prices have boosted RIL’s Ebitda (pre-tax profit) from oil and gas exploration and production business to a seven-year high. Revenue from the segment rose 3.5 times to Rs 7,492 crore in 2021-22 while Ebitda surged 21 fold to Rs 5,457 crore.

Roy observed prices would remain firm given no additional capacity is expected to come on stream until 2026. Europe consumes about 85 million tonne per annum, which amounts to 1% of global supplies. “We expect prices to remain elevated. KG-D6 gas, which attracts a price ceiling will be quite attractive because of the lower prices compared to the rest of the market,” he said.

Demand for natural gas is expected to remain strong, and higher production based on KG-D6 field as well as prices will drive value for the business. Reliance and BP, Roy said, currently produce about 20% of India’s total domestic production and the MJ field would raise to 30% in the next 20 months.

After production at the MJ field starts, production is expected to reach 30 mmscmd in 2023. “We have now drilled all the wells and we expect to undertake the lower and upper completions over the next few months, “he said.

The company is also carrying out exploration activities in block KG-DW1, which is contiguous to KG-D6.Reliance and its partner BP of UK produce about 18 million standard cubic meters per day of gas from two sets of new fields in the eastern offshore deep-sea block KG-D6.     

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