RIL charts multi-year plan to offset decline in natural gas output

Mumbai: Reliance Industries is preparing a multi-year campaign to increase natural gas production as it expects the gas prices to remain elevated due to the West Asia conflict, company executives said Friday. The efforts are also aimed at compensating a natural decline in gas production at its KG-D6 and coal-bed methane (CBM) blocks.

The company didn't elaborate on its plans to boost gas output from KG D6. Gas prices, which surged during the war due to stranded trade volumes caused by the closure of the Strait of Hormuz, have since eased but remain well above pre-war levels, RIL management said on an earnings call Friday.

With regional tensions still simmering, the company expects prices to stay elevated for as long as the escalation persists. This scenario is working in Reliance's favour on price realisation from its KG-D6 gas fields, off India's east coast.

The ceiling price applicable to KG-D6 gas is currently at $8.9 per million metric British thermal unit (mmBtu)- about a dollar less than the previous half-but the company expects it to trend upward toward $9.9 per mmBtu in the second half of the year, driven by benchmark price movements tied to the geopolitical situation.

"As long as this escalation remains, prices will continue to remain elevated," said Sanjay Barman Roy, president - E&P at RIL. "So, we can get better price realisation in KG-D6. We have a ceiling price, but that ceiling price is expected to go up by at least $1 per mmBtu; that's our expectation."

On the demand side, gas consumption in India has declined about 10% y-o-y in the June quarter, which executives said is linked to broader regional tensions disrupting traditional supply routes. The company also said continued investment in its CBM operations, with a 40-well multilateral drilling programme, is set to continue across its blocks.