RIL’s interest burden to rise due to cap on KGD6 gas output

Government needs to allocate additional volumes of gas.

Reliance Industries Ltd (RIL) has said that the company’s interest burden on repayment of loans of about Rs 28,000 crore taken to develop its prolific Krishna Godavari Basin D6 block will increase due to lower output from the field.

RIL is producing below its potential from the fields, as the Government is yet to identify additional customers to take D6 gas. The company’s revenue from gas sales will get delayed due to cap on its production.

Mr P.M.S. Prasad, Executive Director, RIL, said, “At present, we are producing around 60 per cent of what we can produce from D6. So there is a lag in revenues, which is around $100 million per month. The deferred revenue on account of lower production will also increase the company’s interest burden. We had a certain schedule for repayment of debt, which will now get deferred and I will have to pay $17–18 million per month higher as interest cost.”

Currently, RIL, which has a potential to produce more than 60 mscmd today, is producing about 37 mscmd from the fields. At peak the production from the fields is projected at 80 mscmd.

Customers from priority sectors have been identified by the Government for the initial output of 40 mscmd from the fields. For RIL to ramp-up its production the Government needs to allocate additional volumes of gas.

The delay in additional allocation is likely to push back peak production of 80 mscmd from the fields by at least three months. “Our internal target was to reach 80 mscmd by December. Now, if we start ramp-up, it may not be December. It can be March (delay by a quarter),” he said.

The ongoing legal disputes for gas supplies which RIL is involved in – one with Anil Ambani Group company and another with public sector power utility company NTPC – is being seen as a reason for delay in allocation of further gas by the experts.

On demand for D6 gas at $ 4.2/mBtu (landfall point), Mr Prasad said, “Today, we have request for supplying about 85 mscmd, out of which 82 mscmd are capable of immediate offtake.”

As regards ramping up crude oil production from MA fields in the D6 block, he said, “We are hoping to reach 25,000-30,000 barrels by the end of the year.” Currently, the company is producing the crude oil from three wells, which it plans to take up to eight.

RIL is investing $2.23 billion in developing the oil fields, which also have a potential to produce around 9 mscmd of associated gas. “Gas production from MA fields will be corresponding to oil production reaching its peak.”

Source: HBL

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