Reliance Industries signs PSC with Myanmar Oil & Gas Enterprise for two offshore blocks

MUMBAI: Reliance Industries has signed a production-sharing contract with Myanmar’s state-owned Myanmar Oil & Gas Enterprise for two offshore blocks that it bagged through competitive bidding in 2013, the Indian energy major said in a statement late Tuesday.

Billionaire Mukesh Ambani-led Reliance Industries will be the operator of the blocks with a 96% participating interest. The blocks are located offshore in the Tanintharyi basin of Myanmar in water depths up to 3000 ft. and together encompass total area of 27,600 sq kms. “RIL’s participation is in line with its strategy to expand its international asset base by investing in internationally attractive oil and gas destinations. The company in this way will leverage its organisational capabilities and expertise to create value for the E&P segment,” the company said in the statement. A company spokesperson said with the production sharing contract in place now, the company will work out the schedule for starting work on the blocks.

RIL, one of India’s most valuable companies, is focusing on expanding its international business even as it faces challenges in its domestic exploration and production business. The company’s output from the Krishna-Godaveri Block 6 continues to be low. In the quarter ended December, KG-D6 averaged output at 11.8 mmscmd of gas, significantly lower than the peak production of around 70 mmscmd touched in March 2010. The company has initiated arbitration with the government on gas price and as well as the oil ministry’s earlier decision to penalize the company for the fall in output.

At the company’s annual general meeting last June, chairman Mukesh Ambani had said the company would continue to look at global opportunities to fulfill its global ambitions. Last year, RIL entered a pact with Mexico’s national oil company Petroleos Mexicanos (Pemex) to explore upstream oil and gas business opportunities in that country. The company has also ventured into Venezuela and Iraq. In a research report Tuesday, Morgan Stanley said that RIL’s profit stagnated over the last five years largely because of the decline in E&P production and cyclical volatility in Petchem margins, which have remained flat since FY11 levels. To change this, RIL embarked on a $40bn capex cycle (over FY14-18), of which $15.5bn is planned for the four key downstream projects in its refining and petchem business. “RIL’s profits stagnated for the last five years, leading to underperformance of 80%. FII ownership and valuations are at multi year lows. With around 70% of $40bn capex for F14-18 now behind, profits are finally set for a three-year compounded annual growth rate of over 15%.”

Source: The Economic Times

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