After a gap of seven years, Reliance Industries and its partner BP on Thursday pledged to infuse Rs 40,000 crore in the deepwater gas fields of the Krishna-Godavari (KG) D6 block on the country’s east coast. The investments will be over the next three to five years.
The renewed agreement between the two companies will also include exploring non-conventional energy sources such as advanced low-carbon fuels and renewable energy, apart from investing in downstream businesses, including retail fuel outlets. Since 2011, when BP bought a 30 per cent stake in some of RIL’s oil and gas production-sharing contracts, the capital-intensive gas fields in the KG-D6 block haven’t seen any major investments.
Addressing the media along with BP’s CEO Bob Dudley, RIL chairman Mukesh Ambani said the proposed investments in the R-series gas fields in KG-D6, which have witnessed a steep fall in production over the last few years, would yield 30-35 million metric standard cubic metres per day of gas. The additional gas production would bring down the country’s dependence on imports by 10 per cent, which is in line with the government’s plans as well.
Dudley said: “Changed (government) policies have allowed us to develop new resources.”
Since November 2014, gas prices have been partially linked to markets. The prices are capped as per a formula linked to spot market prices in select global hubs, and on a biannual basis, the prices are revised. Although the prices have only come down from the level fixed initially under the new regime to the current $2.48 per million British thermal unit for April-September 2017 period, Ambani said he was happy with the new pricing mechanism.
RIL is fighting four arbitration cases relating to the KG-D6 block, all involving the government or its arms (Directorate General of Hydrocarbons and ONGC). However, Ambani said the two companies don’t expect these affecting fresh investments. “We are sure we will get a fair outcome and it will not come in the way of our future investments,” he said. He clarified that despite being in arbitration case with state-run ONGC, both companies have an ongoing business and RIL is open for further business.
The new cooperation agreement will also explore trading of fuel and carbon emission trading. The collaboration will also address the mobility needs of urban, rural, industrial, and highway consumers in India, applying capabilities of both the companies. Ambani said the companies plan to deliver “higher value, low price” solutions to customers and India will be the first market to experience the outcome of the projects. “We will be working with universities across the world and various pilots will be done. We aspire to export this model to overseas customers as well,” said Ambani.
Kameswara Rao, partner, PwC, said: “It’s a business imperative for large energy companies to prepare themselves for a low-carbon economy, which means both reduced demand for their traditional products and market demand in other segments. Large energy companies, especially those with upstream interests, have a healthy risk appetite, capability and deep pockets to credibly invest and even reshape low-carbon technologies, such as, say, offshore wind.”