<p>Moody’s Investor Service, a rating agency, ascertained that the decrease in gas output in KG-D6 field, owned and run by Mukesh Ambani led Reliance Industries Limited (RIL), is likely to have only a modest impact on RIL’s overall financial health. The decrease in gas output could push back company’s cash flow by a small margin, but given that RIL and BP have joined forces to combat the slump in gas output; it is likely the situation will turn around sooner than anticipated.</p>
<p>Following the completion of RIL-BP deal, RIL now stands to employ BP’s advanced petro-technical skills, the reservoir skills and the exploration skills to its advantage and get the production from its field up and running to meet the projected output mark, suggested Moody’s Vice President and Senior Analyst Vikas Halan.</p>
<p>KG-D6 is faced with decline in its output due to unanticipated reservoir complexities. Its output declined gradually to less than 45 mmscmd instead of rising to 80 mmscmd as anticipated in the field’s initial assessment. However, satellite fields in the KG-D6 block and discoveries, also known as the ‘R-Series’, together are estimated to have the potential to produce as much as 35 million cubic meters a day of gas. RIL is now looking to develop these satellite fields in D1 and D3 blocks, and has submitted a proposal to the government for the same. BP’s CEO Robert Dudley, on his two day visit to India, assured that BP and RIL are working with the government to get additional satellites and the R series reservoirs approved at the earliest so as to begin the process of engineering and, by 2014, get the production of gas rising from KG-D6.</p>
<p>With respect to RIL’s Baa2 local currency issuer rating, Moody’s found RIL’s ‘long-term story’ to be compelling. Vikas Halan stated, “Its local and foreign currency ratings were last upgraded in February 2006 and have since remained at Baa2. During this period, the company doubled its refining capacity and started production of gas at its KG-D6 block. Moreover its credit metrics have come to a healthy level.”</p>