Reliance Industries along with its partner BP PLC have decided to shed some of its Indian conventional assets only a little over a week after it announced a planned boost in production. Meanwhile, Indian companies – including Reliance – have expressed interest in the exploration and production of unconventional resources in Mexico. The news was announced by India’s petroleum Minister Dharmendra Pradhan during his recent visit to Mexico.
In an announcement made to the Press Trust of India on May 21, Reliance Industries said block KG-DWN-2003/1, where RIL held 60 per cent, BP had 30 per cent and Hardy Oil, 10 per cent, has been surrendered because of operational restrictions imposed by the Defence Ministry. The other abandoned block, CY-PR-DWN-2001/3, was relinquished as prospectivity was not commensurate with the high geological risk involved, Press Trust said.
The announcement comes only eight days after the two companies announced a planned boost of production from their eastern offshore KG-D6 block. The two companies said they will increase the production of natural gas and aim to get an output, which is around three times the current production, by 2021-2022. They said they expect to earn fair gas price and thus cover their exploration risk.
At the time, the two companies said that the KG-D6 block produced 11.5 million standard cubic meters per day of gas in the last quarter of Financial Year 2014 – 2015. They said they expect the production to reach to 30 – 35 million metric standard cubic meters per day(mmscmd) of gas in 6 to 7 years.
During a meeting with the government, the two companies along with government-owned, Oil and Natural Gas Corporation (ONGC) asked for profitable prices for natural gas to overcome their exploration risk. The private operators wanted the State to make a plan for the changes occurring in the market prices. At present, the gas price is of USD 4.66 per million British thermal unit. The State-owned company, ONGC informed that its discoveries are not feasible at this price.
Apart from owning acreage in India – in partnership with BP – Reliance Industries for a time pursued an aggressive acquisition strategy purchasing stakes in shale assets in Mexico and the U.S. Following the sharp drop in crude oil prices Reliance has begun shedding some of these less economical properties.
This, however, does not mean that they have shut down their foreign operations. Presently, IOC, RIL and ESSAR buy about 6 MMT of crude oil from Mexico. They are also not the only Indian company interested in pursuing acquisition strategy abroad.
ONGC Videsh, the overseas investment arm of Indian oil explorer Oil and Natural Gas Corp, has recently decided to open its office in Mexico City to pursue opportunities in upstream sector. It has also followed RIL’s lead in signing a MoU with PEMEX for cooperation in upstream sector.
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