Oil and Gas Exploration & Production

Vision

To be India’s Leading Player and major contributor to India’s Gas based economy supplying >25% of India’s production.

Mission

Our mission is to maximise stakeholders’ value by finding, producing and marketing hydrocarbons and to provide sustainable growth while catering to the needs of customers, partners, employees and the local communities in which we do business. We will conduct our business in a manner that protects the environment as well as the health and safety of our employees, contractors and the local communities in which we do business.

E&P Asset Life Cycle and Portfolio

E&P Portfolio

Notes: Newpek’s stake was acquired by Ensign and Reliance

Industry Overview

CY 2020 was a turbulent year for global oil and gas industry as COVID-19 related restrictions lowered demand from transport and other sectors. Market saw an oversupply of ~20 MMb/d in April 2020, pushing Brent prices to US$18.5/bbl before recovering to US$63.5/bbl by the year-end. There was an overall collapse of 8.8 MMb/d demand in 2020. Majority of E&P companies opted to defer project investment decisions amid capital preservation measures. Brent and West Texas Intermediate (WTI) crude averaged at US$42.0/bbl and US$39.2/bbl respectively in CY 2020. This was US$15/bbl lower than the average CY 2019 price.

The demand is expected to recover, though resurgence in COVID-19 cases is slowing the rebound. Widespread vaccination effort and an acceleration in economic activity coupled with OPEC+ decision to delay further easing of cuts and Saudi Arabia’s additional supply reduction of 1 MMb/d in February and March is expected to spur stronger growth in coming time.

Global gas demand fell 2.5% to ~3,840 BCM while output fell 3.6% to 3,918 BCM. Natural gas prices in 2020 remained low due to dampened economic activities impacting both production and consumption. US Henry Hub gas price averaged at US$2.05/ MMBTU (compared to average of US$2.57/MMBTU in CY 2019), the lowest annual average price in decades.

Emerging Trends and Business Response

Performance Update

Segment revenues for FY 2020-21 were lower by 33.4% y-o-y to `2,140 crore primarily due to lower volumes from conventional fields and overall lower commodity price realisation. EBITDA for the year declined by 26.9% to `258 crore.

For the year, domestic production (RIL share) was at 27.8 BCFe, down 28.4% y-o-y due to expiry of Panna Mukta Production Sharing Contract in December 2019 and cessation of production from D1D3 (KG D6) field in February 2020 and in US Shale (RIL share), production was 98.8 BCFe, up 22.9% on a y-o-y basis.

Business Performance

KG D6

Till date, the Block has produced 3 TCFe of gas, oil and condensate while establishing several global benchmarks in terms of operational performance, including 99.9% uptime and 100% incident-free operations. Majority of existing production facilities are being utilised towards integrated development of the three ongoing projects.

R Cluster Field

The R Cluster field was commissioned successfully in December 2020, despite challenges imposed due to COVID-19 and adverse weather. Located at a water depth of greater than 2,000 meters, it is Asia’s deepest and India’s first ultradeepwater gas field.

All six wells have been opened and tested, with ramp-up programme currently ongoing. Current production is in line with expectation and is being ramped-up. The field is expected to reach plateau gas production of about 12.8 MMSCMD in 2021.

R Cluster and Satellite Cluster have been commissioned.

Satellite Cluster
All five development wells have been drilled and completed. Production from the field commenced in April 2021, two months ahead of schedule.

Development Status

MJ Field
Engineering, procurement and manufacturing activities for FPSO, Subsea Production System, Risers and Umbilicals are currently underway. Drilling campaign commenced in March 2020 and is currently ongoing. First installation campaign commenced in 4Q FY 2021 with the second and final installation campaign planned in 4Q FY 2022.

Abandonment
D1D3 field ceased production in February 2020. The D1D3 Field Decommissioning Plan for abandonment of wells and facilities has been submitted to OISD for approval.

Exploration Strategy

RIL’s exploration strategy is focused on catchment areas to leverage existing infrastructure. Block KG-UDWHP-2018/1 (KG-UDW1) was awarded to RIL-bp JV under OALP II licensing round and Petroleum Exploration License (PEL) was issued in August 2019. Due to the ongoing COVID-19 pandemic, the Government of India granted 341 days extension of the initial exploration phase.

3D Seismic Acquisition campaign is being undertaken in the Block.

In Marcellus JV, Chevron put one pad on production in operated areas which was drilled and frac’ed in 2019, before handing over the operatorship to EQT.

In Eagleford JV, Ensign continued with one rig programme until 1H CY 2020. Only three new wells were put on stream, while it drilled 11 wells.

Reliance’s aggregate capital investments across JVs decreased significantly y-o-y and was US$66 million during CY 2020.

In 2020, the JVs together drilled 28 wells and put 26 wells on production.

Gross JV production was ~0.64 BCFe/d for the two JVs, up 22% y-o-y. Reliance’s share of production and sales were at 99.0 BCFe and 85.9 BCFe, respectively in CY 2020, compared to 80.4 BCFe and 70.5 BCFe in CY 2019.

Update on Arbitrations and Other Legal Issues

Due to the COVID-19 related circumstances, there has not been any progress in the following matters: KG D6 Cost Recovery Arbitration, Public Interest Litigations relating to KG D6 Block pending before the Hon’ble Supreme Court of India, suit filed by NTPC Limited against RIL before the Hon’ble Bombay High Court, Government of India’s proceedings seeking setting aside of arbitration award relating to alleged migration of gas from KG D6 Block before the Hon’ble Delhi High Court and Writ Petition filed by RIL before Delhi High Court relating to jurisdiction of Delhi Anti-Corruption Bureau.

PMT Arbitration
On January 29, 2021, in its latest final partial award, the Arbitration Tribunal has unanimously decided certain issues in favour of BG Exploration and Production India Limited and RIL (together the Claimants). Government of India has filed an appeal before the English High Court against the latest final partial award. Further, due to the COVID-19 related circumstances, there has not been any substantial progress in the claimants’ application before the Arbitration Tribunal seeking an increase in the PSC Cost Recovery Limits and government’s execution petition before the Hon’ble Delhi High Court seeking enforcement and execution of the Tribunal’s 2016 Final Partial Award.