Reliance may get nod to invest $1.5 billion in satellite fields

The fields can produce 10 million metric standard cubic metres a day (mmscmd) by 2016 and will help shore up output from the block, which has seen a 35% drop in output in the past 15 months.

After months of delay, the government may approve Reliance Industries’ (RIL) $1.529-billion investment plan for developing four satellite fields in the flagging KG-D6 block.

The KG-D6 oversight committee, which includes officials from the oil ministry and its technical arm—the Directorate General of Hydrocarbons (DGH)—is slated to meet tomorrow to consider the approval for the field development plan (FDP) for the D-2, D-6, D-19 and D-22 fields surrounding the currently producing Dhirubhai-1 and -3 fields.

Sources privy to the development said the fields can produce 10 million metric standard cubic metres a day (mmscmd) by 2016 and will help shore up output from the block, which has seen a 35% drop in output in the past 15 months.

The oversight panel, called the Management Committee, had in its last meeting on 2nd December refused to approve the investment plan saying that the proposal made in December 2009 was based on the prices of that year, and new rates need to be worked out at the current prices.

Sources said RIL and its partners, UK’s BP Plc and Niko Resources of Canada, felt reworking rates would require several months and would lead to loss of the four-month weather window in the Bay of Bengal that began this month.

As a compromise, RIL agreed to cap spending on the four satellite fields at $1.529 billion, give or take 15%. It includes $30 million pre-development activity cost that RIL and BP have been insisting on taking up during the next quarter for pre-engineering and other studies.

RIL has so far made 18 gas discoveries in the KG-D6 block. Of these, D-1 and D-3—the largest among the lot—were brought into production from April 2009 but output has fallen to 32.94 mmscmd this month from 54 mmcmd, reached in March 2010. Together with 6.86 mmscmd of associated gas produced from MA oilfield in the same area, total production from the block is 39.8 mmscmd.

The company had in July 2008 submitted an FDP for nine satellite gas discoveries (D-2, D-4, D-6, D-7, D-8, D-16, D-19, D-22 and D-23) with an estimated capex of $5.6 billion and reserves of 1,708 billion cubic ft (bcf).  It later submitted an optimised development plan for the four satellite gas fields at the end of 2009. RIL estimated 1,733 bcf of in-place gas reserves in the four finds, of which 626 bcf can be produced. However, the DGH trimmed down the estimates to 1,342 bcf and 617 bcf, respectively.

Its proposal to invest up to $2.338 billion to produce about 15 mmscmd of gas from D-24 or the R-Series gas field has been pending in its eastern offshore KG-D6 block. The field has gross in-place gas reserves of 1.64 trillion cubic ft.

In the forenoon, Reliance Industries was trading at around Rs766.55 per share on the Bombay Stock Exchange, 0.74% up from the previous close.

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Bharati Shipyard approves Rs 2,854-crore CDR plan

"Majority of our orders come from the European markets, which is currently facing challenging times. However, we are in the process of delivering five vessels in the next six months," managing director PC Kapoor said.

Bharati Shipyard said its board has approved a Rs2,854-crore corporate debt restructuring (CDR) programme as part of efforts to optimise costs.

“The debt restructuring will help us to optimise costs and resources in the time to come,” company’s managing director PC Kapoor said in a statement.

Bharati Shipyard’s total debt currently stands at Rs3,250 crore. The restructuring pertains to “term/working capital debt”. The company, which is in advanced stages of completion of its two greenfield shipyards at Dabhol and Mangalore, said it has Rs6,800 crore order book which would be executed by 2014.

“Majority of our orders come from the European markets, which is currently facing challenging times. However, we are in the process of delivering five vessels in the next six months,” Mr Kapoor said. He said the company would undertake various initiatives to optimise the current resources in view of the overall sectoral slowdown and the challenging economic scenario. “The overall shipping industry in India is under tremendous pressures. However, Bharati Shipyard is confident of its business model and successfully weathering the current business challenges,” he said.

In the forenoon, Bharati Shipyard was trading at around Rs72.15 per share on the Bombay Stock Exchange, 5.41% up from the previous close.

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IIFCL plans to start advisory services subsidiary by March

Takeout financing is a procedure under which loans given by banks to infrastructure firms are sold to other institutions. This is to enable banks recover their much-needed funds ahead of the payment schedule under the loan agreement.

India Infrastructure Finance Company (IIFCL) has said it proposes to operationalise its project advisory subsidiary by the end of March next year.

“We hope the new subsidiary begins its operations by the end of the current fiscal,” said IIFCL chairman and managing director SK Goel. The board has approved setting up a separate subsidiary of IIFCL for project development advisory services, he said. This subsidiary would provide advisory services for infrastructure development, he said, adding that this would greatly help in timely development of projects.

On the recent changes on ‘Takeout’ financing by the government, Mr Goel said the modifications have been carried out to make the scheme more attractive to both infrastructure project developers and banks. Takeout financing is a procedure under which loans given by banks to infrastructure firms are sold to other institutions. This is to enable banks recover their much-needed funds ahead of the payment schedule under the loan agreement. This is done to address the asset-liability mismatch.

Transparent and a competitive pricing for Takeout Finance Scheme have been put in place, Mr Goel said.

The pricing of Takeout shall range from 0.25% to 1.5% over the benchmark rate of lending of IIFCL which is currently 9.65% depending upon the post commercial operation date (CoD) credit rating of the project, he said.

Major concession in pricing has been announced for PPP projects and the current rate of Takeout would range from 9.90% to 10.85% depending on the ratings of the project, he said. As part of the modification, he said the government has allowed receiving of proposals for Takeout from borrowers also, he said.

Existing lenders would be incentivised by way of passing on the Takeout fee to the extent of 0.3% of the takeout loan to the borrowers. In case of road sector projects, Takeout can occur at any time after actual CoD, he added.

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