Reliance not to spin -off KG basin gas fields

Reliance Industries (RIL) is not planning to hive off its natural gas fields in the Krishna-Godavari (KG) basin as a separate company, according to reports quoting senior company officials. Earlier media reports had indicated such a possibility, citing the need for additional funds for exploration and access to deep-water production technology. RIL owns 80 per cent of these fields where some of the largest natural gas discoveries in recent years were made.

The earlier reports also speculated that RIL may sell a minority stake in the new natural gas company to strategic investors. Some of the global oil majors are reportedly very keen to acquire the stake, but Chevron was said to be the frontrunner. RIL had sold a 5-per cent stake in its subsidiary Reliance Petroleum, which is setting up a 27 million tonnes per annum refinery in Gujarat, to Chevron. The US company has an option to hike its stake in Reliance Petroleum to 26 per cent.

RIL has received government approval for the development plan for the Dirubhai-1 and Dirubhai-2 gas discoveries in the KG basin. Revised estimates put the reserves in these two blocks at 11.3 trillion cubic feet of natural gas. Based on the revised estimates, the company has hiked its targeted production plateau from 40-million cubic metres of gas per day to 80 million cubic meters. Some analysts believe this is a conservative plan and actual production plateau may be over 100 million cubic metres. Development of these fields and setting up of production facilities may see an investment of up to $5 billion.

Investment bank Goldman Sachs has reportedly valued these gas discoveries by RIL in the KG basin at around $35 billion. Even if RIL can sell a minority stake in these fields, it can net sufficient funds to finance its aggressive exploration plans. The company believes that the domestic exploration blocks – both onshore and offshore – have huge potential as the country has not been intensively explored for oil and gas so far.

RIL also has exploration interests in countries like Yemen, Oman and Timor Leste. There are also unconfirmed reports that RIL is considering a new oil refinery in Yemen besides retail marketing of petroleum products in Sri Lanka.