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The largest company in terms of market cap, Reliance Industries (RIL) expects the price of natural gas in India to start rising in October once again as its gas exploration business harvests from the global surge in energy prices which has already taken the rates at a record level.

Sanjay Roy, senior vice-president for exploration and production, said in an investor call following the announcement of its quarterly earnings on Friday, said that RIL expects the price cap for its KG-D6 gas sales to rise over the current $9.92 per million British thermal units, reported by PTI.

Notably, the government fixes gas prices every six months based on international rates. From April 1, the gas prices from old or regulated fields more than doubled to a record-high $6.1 per mmBtu, while the prices reached $9.92. per mmBtu for difficult fields like those lying in deepsea.

Now the next rate revision is scheduled for October.

As per the report, it is expected that gas prices from old fields of government-owned Oil and Natural Gas Corporation (ONGC) will be raised to about $9 per mmBtu and the cap for difficult fields is forecasted to likely rise to double digits.

Roy stated that in fact, RIL has also seen prices rise, "as we know the gas markets are quite tight and prices have been elevated and that effect we are seeing now in the revenues as well as improved EBITDA margins."

Going forward, Roy said that the ceiling prices to increase to $9.92 in the first half (of the current fiscal that began on April 1) - that has been notified. And further, he said, "We expect increases going from there onwards in the second half of the year."

During the fourth quarter of FY22, RIL's oil and gas business revenues increased by 136.8% Y-o-Y to 2,008 crore. Segment EBITDA sharply increased to 1,556 crore, with an EBITDA margin of 77.5%. This was primarily due to higher gas price realization in KG D6 and CBM.

In its audit report, RIL pointed out that KGD6 Gas production during 4Q FY22 was at 37.7 BCF (RIL’s share) vis-à-vis 15.0 BCF (RIL’s Share) production in 4Q FY21.

While RIL's average gas price realized for KGD6 was at $ 6.13/MMBTU in 4Q FY22 vs $ 3.99/MMBTU in 4Q FY21. CBM gas production was at 2.4 BCF in 4Q FY22 vis-à-vis 2.8 BCF in 4Q FY21. Furthermore, the gas price realized for CBM was higher at $ 7.64/MMBTU(GCV) almost 1.5x of realised prices in 4Q FY21.

For the first half of FY23, the government has notified a price ceiling of $9.92/MMBTU for KG D6 gas.

For full-year FY22, the Mukesh Ambani's conglomerate garnered revenues of 7,492 crore from the oil and gas business rising by 3.5 times. Segment EBITDA sharply increased to 5,457 crore, with an EBITDA margin of 72.8%.

On oil and gas business performance for FY22, RIL said that this was primarily due to higher production from KGD6 post commencement of gas production from R-Cluster and Sat-Cluster field coupled with higher gas price realization in KGD6 and CBM. The average price realization for KGD6 gas was at $ 4.92/MMBTU in FY22 vs $ 3.96/MMBtu in FY21.

RIL along with its partner bp plc produces about 19 million standard cubic meters per day of gas from two sets of new fields in the eastern offshore deepsea block KG-D6.

Highlighting Reliance-bp's target to start production from the MJ field in the same block by the end of the year, Roy said the "MJ field is very much on track." Once MJ starts, RIL expects production to reach 30 mmscmd in 2023.

Further, Roy said, "We have now drilled all the wells and we expect to undertake the lower and upper completions over the next few months. The FPSO is on track. It is coming together, and we expect that to converge with the completion of the wells towards the end of this year."

He explained that despite challenging circumstances because of the weather window, RIL expects to bring this field on stream by the end of the year," he said, adding the firm is also carrying out exploration activities in block KG-DW1, which is contiguous to KG-D6.

Talking about global markets, Roy stated that the tightness has been exacerbated by the Russia-Ukraine conflict. He added, "Now in Europe as they try to diversify their source from Russian supplies, there seems to be quite a bit of competition with the Asian consumption. Europe itself consumes about 85 million tons per annum, which is 1% of global supplies."

"So, you know, a bit them moving away from Russian supplies there's going to be tightness particularly because there's no additional capacity coming on stream until at least 2026 or so," Roy said during the investor meeting.

Thereby, Roy expects the tightness to continue, and prices to be elevated. For India, he said that the country has seen a slight pullback because of the high prices.

However, he also said that KG-D6, which has a price ceiling, will be quite attractive because of the lower prices compared to the market prices.

Pointing out that demand continues to remain quite strong, Roy said the forward outlook is that sustained production and increased production based on the KG-D6 field as well as prices will drive value for the business.

Roy stated that Reliance-bp is currently producing about 20% of India's total domestic production and MJ would help increase this to up to 30%.

After gas price revision from April 1, Morgan Stanley had highlighted that ONGC may witness a $3 billion (about 23,000 crore) rise in its annual earnings from the more than doubling of the price of natural gas it produces, while Reliance may get $1.5 billion ( 11,500 crore) more in revenue.

Currently, gas holds about 58% of domestic gas production for ONGC, and Morgan Stanley mentioned that every $1 per mmBtu change in gas price affects ONGC's earnings by 5-8%.

In its report last month, Morgan Stanley had also predicted a further hike of 25% in the next revision scheduled for October 2022 - citing tight supplies as the cause to keep four global benchmark prices at elevated levels.

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