A vast amount of India's natural gas production comes from the western offshore regions, particularly the Mumbai High complex. India also imports ample natural gas. Its state-owned companies account for the bulk of natural gas production. ONGC and Oil India lead with respect to production volumes, while some foreign companies participate in upstream developments in joint-ventures and production-sharing contracts.
Reliance Industries is the largest natural gas supplier in the private sector. It is in the limelight as, in the week ending December 25, it produced 38.43 million cmd of natural gas from the Dhirubhai-1 and 3 gas fields and the MA oilfield in Block KG-DWN-98/3, or KG-D6, in the Krishna-Godavari Basin of the Bay of Bengal, according to a status report filed by it with the Oil Ministry. Output from the D1 and D3 gas fields was 31.58 million cmd; from the MA, it was 6.85 million cmd. The share of Reliance Industries, operator of the world's largest refinery complex, declined to its lowest in 35 months on concerns regarding lower refining profits and falling natural gas output, which might drive down earnings.
The stock has dropped 35 percent this year and 55% from its peak in 2007, while the Index has corrected 25% from its peak. It has been underperforming for the past four years. Reliance is struggling to reverse a decline in gas output from the nation's biggest deposit, which resulted in it missing analysts' estimates thrice in the last four quarters. Net income this quarter may also be affected because of lower refining margins. We see that a production ramp-up is possible, but not before FY 14-15. Hence, ahead, Reliance could be a major laggard of the Index .
Ahead of a meeting of an empowered group of ministers (eGoM) later this month, private power producers are pushing for priority in natural gas supply. They want 18 million cmd of gas being supplied from nominated fields for non-core sectors to be shifted to priority sectors such as power and fertilisers. They also want enough gas supply to enable all power plants to be able to work at a 60 per cent plant-load factor.
The best alternative is to import gas to offset the reduction in Reliance's production. Now the million-dollar question is: who would be the major beneficiary???? All those companies that import gas could be major beneficiaries….. Petronet LNG among them
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
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