PORTFOLIO

INDUSTRY OVERVIEW

2022 was another volatile year for global oil markets on account of unprecedented challenges. At the start of the year, strong oil demand growth was expected as the economy continued its recovery from the global pandemic. However, Russia-Ukraine conflict introduced huge geopolitical uncertainties and caused energy prices to soar.

Global oil demand in CY 2022 grew over 2 million b/d from 2021 but remained below pre-pandemic levels.

The Brent crude oil price averaged $96.2/bbl in FY 2022-23 and the WTI spot price averaged $95/bbl. Oil prices rose significantly in the first half of 2022 due to geopolitical tension but declined in the second half of the year Natural gas witnessed record high prices in 2022 due to steep decline in Russian piped gas supply to Europe, higher gas burn in the power sector and strong storage injections. Europe TTF spot prices averaged a record high of $38/MMBtu in 2022 while Henry Hub prices averaged $6/MMBtu, their highest level since 2008. Asian spot LNG prices also averaged $32.96/MMBtu for FY 2022-23 which is highest level on record.

Record high gas prices led to an unprecedented reduction in gas demand in industry in 2022. Gas consumption declined by an estimated 2% in Asia and 13% in Europe (over 70 BCM). United States experienced growth of 5.4% in gas consumption largely due to colder than average temperatures during the heating season.

LNG demand was dominated by a sharp surge in gross LNG imports into Europe, which was balanced by a steep decline in the rest of the world, particularly in Asia. LNG supply growth was relatively modest in 2022 at 5.5%, despite an unprecedented rise in LNG demand in Europe following the gradual decline in Russian pipeline gas deliveries throughout the year.

The Govt. of India appointed Dr. Kirit Parikh Committee to review domestic natural gas pricing. The Committee recommended removal of price ceiling on gas produced from High Pressure High Temperature (HPHT) fields from January 1, 2026.

BUSINESS PERFORMANCE

PRODUCTION

Since the commencement of production till date the Block KG D6 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% incidentfree operations. The three integrated projects – R Cluster, Satellite Cluster and MJ – have been leveraging the existing hub infrastructure in place by utilising existing production facilities and thus reducing costs.

In FY 2022-23, on back of higher production and improved price realisation, the business delivered a robust performance.

KG D6

Deepwater Production Update

RIL successfully and safely delivered R Cluster & Satellite Cluster projects in the KG D6 Block during the peak COVID times.

Currently both the fields together are producing about 20 MMSCMD gas and contributing ~20% to India’s gas production.

MJ Deepwater Development Update

MJ Field has started producing gas and condensate from 1Q FY 2023‑24. All offshore installation and commissioning works have been completed. Floating Production Storage and Offloading (FPSO) is at the field. Drilling and completion of wells is in progress.

Incremental gas production from MJ field, combined with gas production from R Cluster and Satellite Cluster fields, is expected to deliver ~30 MMSCMD
in FY 2023-24.

Combined production from these three projects is expected to enhance India’s energy security in volatile market environment. With the incremental production from MJ field, KG D6 block is expected to contribute around 30% of India’s gas production.

Exploration Strategy

Block KGUDWHP-2018/ (KG‑UDW1) was awarded to RIL-BP JV under OALP II licensing round and Petroleum Exploration License (PEL) was issued in August 2019.

Despite the COVID-19 pandemic and related challenges, the 3D Seismic Acquisition and Processing campaign was completed in the Block. Currently Seismic data interpretation and prospect maturation is ongoing, post which first exploration well is planned to be drilled in the Block.

Abandonment

D1 D3 Field ceased production in February 2020, following which the Oil Industry Safety Directorate (OISD) and Management Committee (MC) have approved the permanent Plug & Abandonment (P&A) of wells and in-situ abandonment of the associated equipment. P&A of one well in the D1 D3 field has been completed in
FY 2022-23. Procurement of Rig & Services to complete P&A of the balance wells in the D1 D3 field is ongoing.

Following cessation of production in 2018, MA Field was decommissioned, Hydrocarbon freeing of flexible flowlines and flushing of umbilicals was completed and FPSO was demobilised. The flexible flowlines, dynamic flexibles dynamic umbilicals, subsea structures, mooring lines and STP buoy have been decommissioned.
In FY 2022-23, P&A Activities have been completed in all wells in accordance with the Field Decommissioning Plan approved by the OISD and the MC.

Update on Arbitrations and Other Legal Issues

KG D6 Cost Recovery Arbitration

Arbitration claim commenced by the Company in November 2011 seeking declaration that it is entitled to recover 100% of its contract costs under the Production Sharing Contracts (PSC) for the KG D6 Block. The matter is at the stage of Final Hearing as part of arbitration proceedings. Government of India has filed an application before the Arbitration Tribunal alleging that majority of the Tribunal members are biased and cannot continue hearing the dispute. The Arbitration Tribunal has reserved its decision on Government’s bias application.

Public Interest Litigations (PILs)

Three PILs were filed before the Supreme Court in 2013 against the Company in relation to the KG D6 PSC, seeking reliefs in the nature of disallowance of cost recovery, quashing GOI’s decision to approve certain gas price formula and termination of PSC. The Company has submitted that the underlying issues in the PILs are already subject matter of ongoing arbitrations relating to the KG D6 Block. Matter is still pending in the Supreme Court.

PMT Arbitration

Arbitration was initiated by BG Exploration and Production India Limited and the Company (together the Claimants) against the Government of India (GOI) on December 16, 2010 under PSCs, for Panna – Mukta and Tapti blocks due to difference in interpretation of certain PSC provisions between Claimants and Government.

The Arbitral Tribunal by majority issued a final partial award (‘2016 FPA’), and separately, two dissenting opinions in the matter on October 12, 2016. Claimants challenged certain parts of the 2016 FPA before the English Courts, which delivered its judgment on April 16, 2018 and remitted one of the challenged issues back to the Arbitral Tribunal for reconsideration. The Arbitral Tribunal decided in favour of the Claimants in large part vide its final partial award dated October 1, 2018 (‘2018 FPA’).

The Government and Claimants filed an appeal before the English Commercial Court against this 2018 FPA. The English Commercial Court rejected Government’s challenges to 2018 FPA and upheld Claimants’ challenge in February 2020 and remitted the underlying issue in challenge back to the Arbitration Tribunal for determination. Tribunal gave favorable award on January 29, 2021 (“EPOD Agreements Case Award”).

Government challenged the EPOD Agreements Case Award before the English High Court which was dismissed on June 9, 2022 by Judge, Sir Ross Cranston. Claimants have filed an application before the Arbitral Tribunal seeking increase in the PSC Cost Recovery Limits and the same is sub-judice.

Arbitral Tribunal is yet to schedule the final re-computation of accounts and the quantification phase of the arbitration, which will take place post determination of Claimants’ request for increase in cost recovery limit under the PSCs.

The Government has also filed an execution petition before the Hon’ble Delhi High Court under sections 47 and 49 of the Arbitration and Conciliation Act, 1996 and Section 151 of the Civil Procedure Code, 1908 seeking enforcement and execution of the 2016 FPA, ignoring the judgments of English High Court and the subsequent Tribunal Awards. The Claimants contend that Government’s Execution Petition is not maintainable.

The hearing in Government’s Execution Petition before the Delhi High Court has concluded. Justice C. Hari Shankar ruled that Government of India’s execution petition seeking enforcement and execution of the Arbitration Tribunal’s Final Partial Award dated October 12, 2016 (“2016 FPA”) relating to disputes under Panna-Mukta and Tapti PSC is not maintainable.

The Arbitral Tribunal vide its Final Award dated July 24, 2018 upheld Contractor’s claims. GOI filed an appeal on November 15, 2018 before the Hon’ble Delhi High Court, under section 34 of the Arbitration Act, against the Final Award of the Arbitral Tribunal.

Vide Judgment dated May 9, 2023, the Hon’ble Delhi High Court upheld the Arbitration Award dated July 24, 2018 in the Gas Migration dispute and dismissed GOI’s appeal challenging the Award.

Writ Petition Filed Against FIR in Anti-Corruption Bureau

In 2014, four individuals filed a complaint with the Chief Minister of the Government of National Capital Territory of Delhi alleging collusion between the then Ministers of the Central Government and the Company in relation to increasing the price of gas produced by the Company from the KG D6 Block. The Chief Minister of Delhi had ordered the Anti‑Corruption Bureau (ACB) to register the first information report (FIR) and investigate the matter.

The Company has filed a Writ Petition before the Hon’ble Delhi High Court questioning the jurisdiction of the ACB in registering the case against the Company. The Company has contended that the ACB lacks jurisdiction to file the case. The matter is currently pending before the Hon’ble Delhi High Court.

RIL KG D6 CSR ACTIVITIES 2022-23

Facilitating Quality Education

All schools were provided with teaching aids, computer systems and trained the school teachers for effective teaching.

Additionally, educational kit comprising of two pairs of uniform, shoes, and notebooks has been providing to around 2,000 students.

DEO Kakinada, attended the 'Swechha' programme as a part of adolescent girls’ education

A comprehensive eye camp was organised at PHC Gadimoga. 30 patients underwent various tests in the camp. 78 patients were operated for cataract and 405 patients were tested for their refraction errors and provided spectacles.

CBM CSR

Reliance Foundation under CBM CSR project continued to work with surrounding community from 150 impacted villages under CBM Project at Shahdol, Kotma and SHPPL locations. Various initiatives on livelihoods, health, education, water & infrastructure creation have ensured a very conducive development environment in project villages

Health

RF Shahdol continued to provide Mobile Medical Unit (MMU) services to community in 150 project villages of Shahdol, Kotma and SHPPL locations under CBM project, which provided around 100,000 consultations on primary and preventive healthcare.

Under Malnutrition Control Program, health check-ups and supplement provision to over 50 SAM/MAM kids and 55 ANC/PNC women continued through MMUs in 14 Aanganwadis from 06 villages of Shahdol. These Aanganwadis are being regularly provided handholding support as part of employee volunteerism program to make them as models.

Farm Based Livelihoods Support

Over 12,000 farming households have been provided various types of support including input provision, improved farming technology transfer, augmenting farm income with alternative income sources etc. This has resulted in sustained income enhancement of 7,000+ households while also contributing to reduced cost of cultivation of all targeted households.

To augment farm income, RF also supports alternative livelihoods which includes support to poultry units, goat rearers, fisheries and cattle owners. For improving cattle health and improve their productivity, 32 veterinary camps were organized in project villages.

Education, Sports, and Skilling

Enabling improved learning outcomes and career orientation to local youth, RF has supported various educational endeavors. 96 meritorious students from schools in project villages of Shahdol were felicitated 27,000 notebooks were distributed to over 9,000 students belonging to project villages.

Physical training also is being organised jointly by RIL security and RF attended by youth aspiring for armed forces and police.

Bus service for facilitating conveyance of girl students are operational which are being utilized by over 400 girl students from 21 villages of Shahdol.

New initiative of football development in the area has been taken up with support of RFYS and AIFF which will develop potential players as coaches who will in turn train kids.