Reliance Industries Ltd (RIL) may have been in the headlines of late for its audacious and expensive foray into telecom, and the ensuing shakeup in the industry, but that doesn’t mean that the Mukesh Ambani-led conglomerate has lost focus on its legacy—the oil and gas business.

RIL and its partner in the hydrocarbon exploration and production business, BP Plc announced the second phase of a Rs 40,000 crore capital expenditure plan to boost gas output from its KG D6 gas block, off the eastern coast of India, on Thursday.

“The ‘Satellite cluster’ is the second of three projects in Block KG D6 integrated development. The first of the projects, development of the ‘R-Series’ deep-water gas fields, was sanctioned in June 2017. Together, the three projects will develop a total of about 3 trillion cubic feet of discovered gas resources with a total investment of around Rs 40,000 crore ($6 billion),” RIL said in a statement. “They are expected to bring a total of around 30-35 million cubic metres (1 billion cubic feet) of gas a day (new domestic gas production) onstream, phased over 2020-2022.”

RIL chairman Ambani said in a statement that the progress of work on the Satellite cluster was “in consonance with RIL’s announcement last year to raise domestic gas production. This development supports the country’s imminent need of increasing domestic gas supply and is a firm step towards making India a gas-based economy.”

Oil and gas production has been the most troublesome business for the conglomerate, which has business interests, including crude production, refining, petrochemicals, retail and telecom. While its crude refining and petrochemicals businesses throw up a copious volume of cash each year (even retail has turned profitable after a long gestation period, and the telecom venture is just about finding its feet), the oil and gas production business has been struggling for a few years.

RIL’s flagship asset in India is the KG D6 deepwater gas block in the Krishna-Godavari basin. It was once touted to be India’s largest gas find, but never quite lived up to its potential owing to technical and geological issues. At its peak, the gas output from KG D6 was supposed to have touched 60 million cubic metres a day. But in the third quarter of fiscal 2017-18 (October-December 2017), gas production from KG D6 averaged a meager 4.9 million cubic metres a day.

For the financial year ended March 31, 2017, RIL’s oil and gas exploration and production (E&P) business garnered a revenue of Rs 5,191 crore (around 1.5% of the company’s consolidated turnover), and an operating loss of Rs 1,584 crore.

While RIL has seen a robust rise in its turnover and profitability over the last couple of years, the E&P business has remained a drag. In an earnings preview report issued by Jefferies ahead of RIL’s Q4 FY18 earnings announcement, analysts Somshankar Sinha, Piyush Nahar and Pratik Chaudhuri write that the positive impact of higher margins and volumes from RIL’s petrochemicals business was likely to be offset by the “drag from refining and domestic E&P (lower output)” and “may leave standalone Ebitda (earnings before interest, tax, depreciation and amortisation) up just 5 percent quarter-on-quarter to $8.9 billion.”

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