RIL casts doubts on new policy regime in upstream sector

The company also cast doubts on the viability of the new notified gas-pricing formula, which will be applicable from April 2014

With the government opting for a revenue-sharing model for the 10th round of oil and gas exploration auctions, Mukesh Ambani-led Reliance Industries (RIL) on Monday expressed doubts on whether the new policy regime would succeed in getting global investors.

RIL, the biggest private-sector player in India, also cast doubts on the viability of the new notified gas-pricing formula, which will be applicable from April 2014.

"Whether people will be coming for revenue-sharing model for a country like India with lower prospectivity has to be seen," said P M S Prasad, executive director of RIL, on the sidelines of Petrotech 2014.

A panel led by former finance secretary Vijay Kelkar had favoured the current production-sharing regime for high-risk, deep-sea oil and gas exploration over the revenue-sharing model that the government plans to implement for the 10th round of New Exploration Licensing Policy. Blocks under the previous auctioning rounds have been given out under the cost-and-profit-sharing model.

Petroleum Secretary Vivek Rae had said on Sunday the new pricing of domestic natural gas according to the Rangarajan formulae would be in the range of $7-8 an mBtu. The current price is $4.2, but Prasad did not appear optimistic. "Some marginal fields may be viable at this price but, specially for ultra-deep water blocks, it would be difficult even at this price," he said.

'No plans to drill more wells in D1 and D3'
Higher gas price would still not incentivise the company to drill more wells. RIL said it has no plans to drill more wells in the D1 and D3 fields of KG-D6.

"We are currently doing workovers on the three shut wells. We are trying to keep it alive till R-series (gas field) comes into production," said Prasad.

He added the plan is to enhance work on existing wells in an effort to increase production. The drop in anticipated production from D1 and D3 were one of the major reasons for a drop in production from KG-D6. This has forced RIL to lower its production expectations from 10.3 trillion cubic feet (tcf) in 2006 to 2.9 tcf last year. Out of this, 2.2 tcf has already been produced. RIL is planning to invest $3.8 billion in R-series.

"It has to be seen whether the new pricing would be viable for R-series, too." He said the company wants to enhance production in a range of 12-15 million standard cubic metres a day.