Energy major Reliance Industries should post a second straight increase in quarterly profit, lifted by higher gas output from fields off India’s east coast and a nascent recovery in refining margins.

India’s leading listed conglomerate, controlled by billionaire Mukesh Ambani, has been scouting for acquisitions overseas, and progress on that front will determine its outlook. Reliance, valued at $78 billion, recently said it would pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the United States with Atlas Energy.

The deal followed two failed attempts to buy overseas firms as Reliance looks to expand its presence outside India, break into new markets and broaden its businesses, which include refining, oil and gas exploration and petrochemicals.

“The company has already invested in its own projects such as its gas fields in India and is going to generate a lot of cash flow,” said Deepak Pareek, an oil and gas analyst at Mumbai-based Angel Broking.

“A lot of that cash has to be pumped into overseas growth opportunities and that’s exactly what it’s done with Atlas.” Bankers say more overseas deals could be in the offing. The outcome of a long-running gas dispute with Reliance Natural, led by Mukesh’s younger brother Anil, will also have a bearing on the company’s outlook.

Reliance is unable to hit peak gas production of 80 million standard cubic metres a day (mmscmd) at its D6 block in the vast Krishna Godavari basin in the Bay of Bengal due to customers not buying allocated volumes, and a lack of pipelines. But analysts say current production of 63-64 mmscmd is still enough to boost results.

Reliance began pumping gas from the block in April last year. Analysts estimate gross refining margins (GRMs), a key measure of profitability, will have dropped about 16 per cent year-on-year in the March quarter to $8.30 a barrel, tracking a decline in Asia’s benchmark Dubai crack margin.

Reliance GRMs nearly halved to $5.90 a barrel in the December quarter. The company’s results will be helped by its acquisition last year of unit Reliance Petroleum. State-run explorer Oil and Natural Gas Corp is expected to post higher earnings on firmer oil prices, but subsidy payouts the group is required to make to state retailers will keep results muted.

A lack of clarity about the government’s subsidy rules means analysts estimates for ONGC are often disparate. “What you’d want to bet on is a company’s business or its management decisions,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. “But here you are betting on whether a government policy will change or not, which just can’t be figured out.” Energy major Reliance Industries should post a second straight increase in quarterly profit, lifted by higher gas output from fields off India’s east coast and a nascent recovery in refining margins.

India’s leading listed conglomerate, controlled by billionaire Mukesh Ambani, has been scouting for acquisitions overseas, and progress on that front will determine its outlook. Reliance, valued at $78 billion, recently said it would pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the United States with Atlas Energy.

The deal followed two failed attempts to buy overseas firms as Reliance looks to expand its presence outside India, break into new markets and broaden its businesses, which include refining, oil and gas exploration and petrochemicals.

“The company has already invested in its own projects such as its gas fields in India and is going to generate a lot of cash flow,” said Deepak Pareek, an oil and gas analyst at Mumbai-based Angel Broking.

“A lot of that cash has to be pumped into overseas growth opportunities and that’s exactly what it’s done with Atlas.” Bankers say more overseas deals could be in the offing. The outcome of a long-running gas dispute with Reliance Natural, led by Mukesh’s younger brother Anil, will also have a bearing on the company’s outlook.

Reliance is unable to hit peak gas production of 80 million standard cubic metres a day (mmscmd) at its D6 block in the vast Krishna Godavari basin in the Bay of Bengal due to customers not buying allocated volumes, and a lack of pipelines. But analysts say current production of 63-64 mmscmd is still enough to boost results.

Reliance began pumping gas from the block in April last year. Analysts estimate gross refining margins (GRMs), a key measure of profitability, will have dropped about 16 per cent year-on-year in the March quarter to $8.30 a barrel, tracking a decline in Asia’s benchmark Dubai crack margin.

Reliance GRMs nearly halved to $5.90 a barrel in the December quarter. The company’s results will be helped by its acquisition last year of unit Reliance Petroleum. State-run explorer Oil and Natural Gas Corp is expected to post higher earnings on firmer oil prices, but subsidy payouts the group is required to make to state retailers will keep results muted.

A lack of clarity about the government’s subsidy rules means analysts estimates for ONGC are often disparate. “What you’d want to bet on is a company’s business or its management decisions,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. “But here you are betting on whether a government policy will change or not, which just can’t be figured out.”

Source:http://reliance-news.blogspot.com/2010/04/gas-sales-to-lift-reliance-results-m.html

State-owned Oil and Natural Gas Corp (ONGC) may have won a large oil block in Venezuela but the Petroleum Ministry wants Reliance Industries to join the project to give stability to the venture.
ONGC Videsh Ltd, the overseas investment arm of the state-run explorer, and Reliance had in 2008 teamed up to bid for the Venezuela’s Carabobo field auction but last year the Mukesh Ambani-run firm walked out sighting delays in the bid round. OVL subsequently roped in Spain’s Repsol YPF and Malaysian state Petronas to win Carabobo-1 heavy oilfield.

But since the project involves investments that may over the life of the project run into USD 40 billion, the Oil Ministry wants Reliance back into the project, sources in know of the development said.

Sources said fillers at very high level were sent to Reliance but it has so far remained non-committal on taking the state.

Reliance has, however, agreed to bail the state-run firms out agreeing to buy over one-fifth of the 400,000-480,000 barrels per day of oil production envisaged from the project.

OVL, Repsol and Petronas all have an 11 per cent stake each in the project, while Indian Oil Corp (IOC) and Oil India Ltd (OIL) have 3.5 per cent each. The remaining 60 per cent is held by Venezuela’s state Petroleos de Venezuela (PdV).

As per the bid conditions, the foreign firms, who were offered a maximum of 40 per cent stake in the project, had to commit to offtake the entire production.

Sources said of the planned output, Repsol had indicated it can take 165,000 barrels per day while Petronas said it could take 100,000 bpd. The remaining 220,000 bpd was split equally between OVL and OIL.

OVL’s share of 110,000 bpd would go to ONGC’s subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL), while Reliance agreed to take OIL’s share for at least 10 years from the start-up in 2016-17.

Source:http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/OilMin-wants-RIL-to-join-hands-with-ONGC-for-Venezuela-project/articleshow/5749798.cms

The MoU between Oil and Natural Gas Commission (ONGC) and international energy major, Shell Exploration Company BV, features broad areas of co-operation.

The sphere of upstream co-operation includes investigation of increasing and enhancing production from existing producing fields in India, joint bidding in NELP and other similar rounds, developing Indian exploration blocks, joint participation in international upstream ventures and evaluation of a joint project for coal gasification facilities in India.

The subject of downstream co-operation includes evaluation of the hydrocarbon supply chain, joint business opportunities in the areas of marine fuels and lubricants as well as refineries and petrochemicals.

Identification and evaluation of joint business opportunities in the field of coal bed methane applications, monetization of currently stranded ONGC hydrocarbon resources, co-operation in the development of renewable energy resources and provisions relating to technology and consultancy services regarding inspection, maintenance, Health, Safety and Environment Management (HSE) and energy efficiency and loss control are some of the other contents of the MoU.

In 2006, Oil and Natural Gas Corporation (ONGC) struck natural gas in ultra-deepwater well UD1 in the Krishna-Godavari block KG-DWN-98/2.

However, this gas discovery in the Krishna-Godavari basin (KG basin) was disallowed by the Directorate General of Hydrocarbons (DGH) as ONGC had abandoned the well. Besides, according to the norms laid down by the product-sharing contract (PSC), if the gas does not flow to the surface, like in this find, it cannot be considered to be a discovery.

ONGC was to contest the DGH views and ask for a third-party audit. According to the company, it was carrying out its activities in the New Exploration Licensing Policy (NELP) blocks in accordance with PSC norms.

In adherence to the norms, in the well UD-1, block KG-DWN-98/2, ONGC notified DGH regarding modular dynamic test (MDT) in the interval 5,243.5 – 5,304 m, which was conducted in the presence of a DGH representative during December 7-15, 2006. The interpreted presence of hydrocarbon was validated through this test.

The company claimed that it had duly informed the DGH of the presence of Non-Associated Natural Gas (NANG) on 23 December 2006. ONGC, in consultation with its partner Cairn Energy India Ltd, submitted its potential commercial interest, meriting appraisal, in the prescribed format to the DGH.

ONGC in KG Basin

Oil and Natural Gas Corporation (ONGC)–operated G1 and GS 15 fields in the KG basin are both predominantly gas fields. GS 15 will start production from April 2010 and G1 from April 2011.

G1 is located 28 kilometers off Amalapuram coast in water depths ranging from 135 to 500 meters, while GS 15, in shallow waters, is located 5 kilometers from the coast in the KG basin.

At their peak, the two fields are expected to cumulatively produce two million standard cubic metres per day (mmscmd) of gas for about 7 years, after which production would decline.

ONGC expects a production of 0.982 million tonnes (MMT) of sweet or low-sulfur crude and 5.92 billion cubic metres (bcm) of gas over a period of 15 years from G1 and GS 15. At present, the fields produce about 400 barrels of oil per day.

ONGC Oil & Gas Discoveries in KG Basin

In March 2005, Oil and Natural Gas Corporation (ONGC) made a significant gas discovery in its “Sagar Samriddhi” Deepwater Exploration campaign at location VA-1A in Block No. KG-OS-DW-IV in the KG basin. The well was completed to target a depth of 2449 meters. The presence of gas was confirmed through log evaluation and wire-line testing.

Cumulatively, ONGC has established about 130 million tons of oil and oil-equivalent gas in-place in KG Offshore.

State-run ONGC had announced that these finds would be brought into production through integrated development with nearby GS-29, G-1 and GS-15 structures.