RIL Plans To Enhance KG-D6 Gas Output

Reliance Industries (RIL), India’s largest private sector company, is planning to increase production from its KG-D6 block to boost output. While the company reported a net profit of Rs 5490 crore in Q2FY14, with improved margins and higher volumes in its petrochemical business, the exploration and production (E&P) segment continued to suffer on account of declining output from the Krishna Godavari (KG)-D6 basin.

RIL had closed half of the 18 producing wells at the Dhirubhai-1 and 3 gas fields in the KG-DWN-98/3, or the KG-D6 block due to sand and water flooding, leading to an 85% output drop at 9.4 million standard cubic metres a day (mmscmd). In Q2FY14, the gas production from the KG-D6 basin dropped to 14 mmscmd, down 51% YoY and 8% QoQ as a result of lower output. Due to high water and sand ingress, 2 of the 6 wells at the MA field were also shut. A report by the Directorate General of Hydrocarbons (DGH) said that the D1 & D3 fields produced 9.4 mmscmd of gas, while the remainder came from the MA field.

According to a DGH status report, RIL, the operator of the block with a 60% stake, produced 12.26 mmscmd from the D1 and D3 gas fields and the MA oil & gas field in the block in the Bay of Bengal in the week ended October 27. Canada-based Niko Resources holds a 10% interest in the KG-D6 block and UK’s British Petroleum Plc holds the remaining 30%.

Over the past few quarters, the E&P division has remained a laggard and pulled down the overall performance of RIL. Reversing the drop in output at KG-D6 will help the company to post better earnings in the next quarter. This news has helped RIL to post good gains (2.65%) in trades on the day of the announcement (November 18).