RIL to defer gas field development if price outlook uncertain

Development of of R-Series and other satellite gas fields dependent on the future economic viability of the required investments, said Niko

Reliance Industries may defer development of R-Series and other satellite gas fields in the eastern offshore KG-D6 block if the gas price outlook was uncertain, its junior partner Niko Resources of Canada said.

RIL has made 19 oil and gas discoveries in the KG-DWN-98/3 block in the Bay of Bengal and so far only three - Dhirubhai-1 and 3 gas and MA oil and gas fields, have been brought to production. Multi-billion dollar development plans for five other finds including the significant R-Series have been approved.

In its Annual Information Form for 2014-15 fiscal filed with Canadian regulatory authorities, Niko, which holds 10 per cent interest in KG-D6 block, said the development of these discoveries was "dependent on the future economic viability of the required investments."

Bringing the finds to production, called development, was "dependent on the future long-term price outlook for gas sales from these projects and the significant uncertainty in this outlook could mean that the development of these reserves could be deferred," it said.

Additionally, it may result in reductions in the company's reported reserves or future net revenues, it said.

RIL is the operator Krishna Godavari basin KG-D6 block with 60 per cent interest while Niko has 10 per cent. BP plc of UK has the remaining 30 per cent stake.

Niko said on expectations of natural gas prices doubling to USD 8.4 per million British thermal unit from April 1, 2014, the focus in the 2013-14 fiscal shifted to developing and appraising the assets in the KG-D6 Block.

However, after three deferrals, in October 2014, the Government of India approved a new domestic gas pricing policy that provided for a price of USD 5.05 per mmBtu on Gross Calorific Value (GCV) basis or USD 5.61 per mmBtu on Net Calorific Value (NCV) for the period of November 1, 2014 to March 31, 2015. This compared to gas price of USD 4.2 on NCV basis in the prior period.

While the price for November to March was "significantly lower than anticipated," the rate for April 1, 2015 to September 30, 2015 was lower at USD 4.66 (GCV) or USD 5.18 (NCV).