Reliance seeks pricing freedom for natural gas

While the exploration and production created economic value to the government, the business resulted in lower shareholder returns, which are even lower than the cost of capital.

The Dollar Business Bureau

Concerned over regulatory challenges faced by oil and gas business, Reliance Industries has sought freedom over fixing of gas prices and an official statement in this regard was made by Mukesh Ambani, CMD, Reliance Industries Ltd. “Contractual commitment of marketing and pricing freedom for natural gas, along with risk-reward balance must be met,” said Mukesh Ambani on Saturday. Addressing company shareholders, Mukesh Ambani raised concerns over oil & gas exploration and production (E&P) business saying, “The E&P business created huge economic value to the government, but, generated lower shareholder returns which are even lower than the cost of capital.” While E&P business helped the nation save $34 billion in foreign exchange by bringing to production in the KG-D6 fields in record time, its contribution stands at just 0.6 % or about Rs 194 crore to RIL's pre-tax profits, he added.  "This is in sharp contrast to other domestic infrastructure sectors such as roads, fertilizers and power where returns are assured at 12 to 16 % under the policy," he noted further. He further informed that 5-6 Trillion cubic feet (Tcf) of discovered resources, which are more than double the 2.5 Tcf gas produced from KG-D6 in the last six years, are waiting to be produced, but, involves huge capital and are technically challenging. Speaking on RIL’s arbitrations against the government involving disputes over disallowance of gas pricing, Ambani stressed on need to follow the purpose and commitment behind New Exploration Licensing Policy (NELP) which pitches for maximization of E&P activities, right risk reward balance, besides promoting marketing and pricing freedom. This will provide predictability and certainty to the investors and we are constructively engaged with the government to resolve legacy issues in a timely manner with regards to our rights to cost recovery, gas pricing and other issues to create value for the nation and our shareholders, he added.    

June 13, 2015 | 8:32 pm IST.