The RIL-BP-Niko combine has decided to test the waters for new prices for E&P equipment and services.
8It has asked for EOIs for an entire range of E&P equipment and services to arrive at new pricing levels for its exploration and production activities in all its blocks in the face of sharply falling prices. The last date for submission is end of August.
8The interest elicited in these tenders will set the tone for pricing of E&P equipment and services in India for the next two ot three years.
8Oil field equipment and service costs have registered a steep decline, ranging from 20 to 30% and in some cases even more.
8RIL, who is the operator for the Indian blocks, is known to drive hard bargains. The company is also trying to leverage its partnership with BP to leverage the fall in prices.
8Given the current state of global markets for equipment and services, the deflation in exploration and production costs is likely to continue over the next two to three years.
8Assuming a 25% initial deflation and going up to 30% over the development cycle of deepwater gas discoveries in the KG basin, the development cost for the RIL-BP combine can come down dramatically.
8RIL had last year estimated the break even cost of its deepwater discoveries will be more than $10/mmbtu.
8But these calculations will now change in the light of the new situation.
If prices for equipment and services continue to fall, the break even cost can in fact come down to around $7.5/mmbtu.
8Will this make the discoveries viable? This will clearly depend on the landed cost of LNG in India but assuming that Henry Hub prices do not decline from current levels of around $2.8/mmbtu, the cost economics would clearly depend on the "premium" that is meant to be given by the government for these discoveries.
8As it is, breaking even is going to be a tough call for deepwater plays, particularly in India given that they are tight oil reservoirs which are HPHT in nature.
8The rapid decline in the D-1 and D-3 fields go to indicate that keeping production going in these reservoirs is a tough job even for a company like BP with all the technology in their hand.
8In this context, the government's move to provide a "premium" as a percentage of the gas produced that can be priced at market rates may not make economic sense in today's environment.
For more details visit indianpetroplus.com
8It has asked for EOIs for an entire range of E&P equipment and services to arrive at new pricing levels for its exploration and production activities in all its blocks in the face of sharply falling prices. The last date for submission is end of August.
8The interest elicited in these tenders will set the tone for pricing of E&P equipment and services in India for the next two ot three years.
8Oil field equipment and service costs have registered a steep decline, ranging from 20 to 30% and in some cases even more.
8RIL, who is the operator for the Indian blocks, is known to drive hard bargains. The company is also trying to leverage its partnership with BP to leverage the fall in prices.
8Given the current state of global markets for equipment and services, the deflation in exploration and production costs is likely to continue over the next two to three years.
8Assuming a 25% initial deflation and going up to 30% over the development cycle of deepwater gas discoveries in the KG basin, the development cost for the RIL-BP combine can come down dramatically.
8RIL had last year estimated the break even cost of its deepwater discoveries will be more than $10/mmbtu.
8But these calculations will now change in the light of the new situation.
If prices for equipment and services continue to fall, the break even cost can in fact come down to around $7.5/mmbtu.
8Will this make the discoveries viable? This will clearly depend on the landed cost of LNG in India but assuming that Henry Hub prices do not decline from current levels of around $2.8/mmbtu, the cost economics would clearly depend on the "premium" that is meant to be given by the government for these discoveries.
8As it is, breaking even is going to be a tough call for deepwater plays, particularly in India given that they are tight oil reservoirs which are HPHT in nature.
8The rapid decline in the D-1 and D-3 fields go to indicate that keeping production going in these reservoirs is a tough job even for a company like BP with all the technology in their hand.
8In this context, the government's move to provide a "premium" as a percentage of the gas produced that can be priced at market rates may not make economic sense in today's environment.
For more details visit indianpetroplus.com
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