JOIN USRIL trims shale gas capex 30% to $860 m
Weak market conditions has forced Reliance Industries to cut down its guidance for capital expenditure (capex) plans for the shale gas segment. In a presentation to analysts given after its results, RIL has said that the capex guidance for FY16 in the shale gas business has been lowered by 30 per cent to $860 million.
According to the quarterly results release put out by RIL, the overall capex for the shale gas segment for the fourth quarter stood at $234 million and the cumulative investment across all joint ventures was at $8.1 billion. The audited proved reserves grew by 11 per cent to 2.95 tcfe for calendar year 2014.
The company also said that the shale gas business is focused on capital preservation by moderating activity levels, reducing service costs, and improving efficiencies.
Ensuring profitable development and retaining optionality through high-grading acreages and improving netbacks will be the key challenges going forward.
Challenged market outlook would most likely curtail near-term growth, but long-term outlook for the business remains promising, RIL added.
Mukta B wells production
The company also indicated to analysts that the margins are likely to improve in the refining segment going forward. “Incremental capacity addition in Middle East would partially offset capacity rationalisation in Australia and Japan. Thus the company expects improvement in operating rates and margins in refining segment,” RIL told analysts.
As far as the exploration and production business is concerned, the management indicated that it is in the process of submitting declaration of commerciality (DoC) for the MJ1 field in Q1 of FY16.
It also indicated that the development for Mukta B is 93 per cent completed and drilling of six wells is expected to start from Q2 of FY16 and will be put into production from the third quarter of FY16. As far as coal bed methane (CBM) is concerned, RIL told analysts that the phase-1 capex for CBM is at $330 million with 200 wells to be drilled and with production expected to start from Q2 of FY16.
The management also indicated that the petcoke gassification project will be viable at current spot LNG prices.
According to the management, the petcoke gassification project is on track and is likely to be complete in early 2016 with 50 per cent of the benefits likely to kick in from FY17.
Even at lower LNG prices, the project is still viable at current spot LNG prices of $7/mmbtu and the company can easily make $2.5/bbl increment margins in refining, RIL indicated to analysts.
RIL lowers shale gas capex guidance by 30 per cent to $860 million
Company expects improvement in operating rates and margins in refining
In process of submitting DoC for MJ1 field in Q1 of FY16
Mukta B is 93 per cent complete and drilling of six wells expected from Q2 of FY16