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RIL's E&P division: Running out of bandwidth?
Oct 18: RIL's E&P segment, managed by PMS Prasad, seems to be the most poorly performing among all of RIL business lines as of now
8Losses continue to mount as high water cut and sand ingress have whittled down gas output. The MA oil field was finally shut down last month while the gas wells continue to pump increasingly lower volumes.
8The Panna-Mukta asset is also pushing lower volumes due to natural declines
8The company sold its CB10 block to Sun Petro
8RIL's two remaining shale JVs in the US are also performing poorly and the company is possibly looking at exiting them.
8The performance of its CBM blocks has been, at best, lackluster and it does not look like the company is very keen on giving them a big push given their low output incrementality.
8The focus is on the $6 billion investment in the R-Cluster, Satellite Cluster and the MJ development.
8But here again, the structure is modular, with lower upfront investment, of around $2 billion to start with, of which 60% will be RIL's share, with the rest being paid out of proceeds from new gas produced. Depending upon the price of gas, the fields are expected to bring in a reasonable return on investment, probably as much or perhaps lower than its other business lines.
8Had it not been for BP's coaxing (as the multinational needed a face-saving exit from a $8 billion investment), RIL would perhaps have not proceeded with further E&P investments in the KG Basin.
8The company is selling the accompanying evacuation pipeline from the KG Basin to the west coast to an asset management company for $2 billion.
8The 30% stake sale for $7 billion to BP is the high point of RIL's E&P business, and it came at a time when the company needed the money to fund its various expansions.
8As of now, RIL seems to be running out of bandwidth, when it comes to the E&P segment, exhausted by multi-billion dollar arbitration disputes and the sheer unpredictability of the entire business model.
Click on Reports for more, including latest contracting updates on its KG Basin investments.

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