Reliance Industries Ltd and its partner BP Plc of UK on Monday announced the start of production from the second set of new discoveries the two are developing in the eastern offshore KG-D6 block. Reliance-BP, which had commenced output from R Cluster in December last year, started production from the Satellite Cluster, the two firms said in a statement.

RIL-BP have been developing three deepwater gas developments in the KG-D6 basin block – R cluster, satellite cluster, and MJ. The satellite cluster which has come on-stream two months ahead of schedule will be starting production.

The Satellite cluster is expected to produce around 6 mmscmd of gas. The first and second cluster together are expected to contribute about 20 percent of India’s current gas production. The three clusters are expected to produce 30 mmscmd gas by 2023.

The three clusters are expected to meet 15 percent of India’s gas demand and will account for 25 percent of India’s domestic production. The third cluster is expected to come on-stream in the latter half of 2022.

However, according to Harshvardhan Dole, VP, Institutional Equities at IIFL the sensitivity of this will not be more than a couple of percentage points for Reliance.

“The share of E&P business in the overall EBITDA of Reliance has significantly dwindled. Even if you were to go by consensus numbers and the prevailing gas price, the share of E&P in the overall scheme of things will be less than 5 percent. So even if you bake in significant ramp-up in these two fields, thanks to the way retail and the other businesses have been ramped up, the sensitivity of this may not be more than a couple of percentage points,” he said in an interview to CNBC-TV18.

He also said that from a stock price perspective, E&P business will contribute meaningfully, but will add up to the EPS.

“From a stock price perspective, if you bake in the overall SOTP, E&P business will not even contribute meaningfully. But having said that, any new project, when it starts, it adds up to the EPS howsoever insignificant it is,” he said.

Dole has a price target of close to Rs 2,060 for Reliance and said that he is looking forward to the Q4 numbers before taking a decisive call in terms of upgrading the target price.

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(Edited by : Abhishek Jha)