In what signals a major shift in the oil and gas business strategy of Reliance Industries Ltd (Ltd), the country's largest private sector company has decided to focus more on overseas acquisitions instead of developing fresh domestic exploration blocks.
"The shift in RIL's strategy will bring better balance to its oil and gas portfolio. We plan to do some value buying that can bring synergies to the rest of our oil and gas business," RIL president & chief executive officer (oil & gas) PMS Prasad told FE.
At present, RIL has 40 exploration blocks in India, won under various New Exploration Licensing Policy (Nelp) rounds, besides 15 blocks overseas in seven countries: Peru, Australia, Iraq, Yemen, East Timor, Oman and Columbia.
Prasad explained that up until now, RIL was averse to acquisitions and had concentrated largely on its exploration assets. As these projects come on stream—as in the case of the Krishna-Godavari basin D6 block—RIL will be looking to acquire some major proven and producing assets, which could also include mid-size exploration & production companies.
Production from RIL's offshore D6 block on the east coast will change the country's whole energy scenario, as its output of 550,000 barrels of oil and oil equivalent by 2010 will account for 40% of India's entire production of hydrocarbons. In monetary terms, this production at current prices would earn RIL Rs 86,000 crore.
However, while attractive global destinations are Russia, West Africa and Central Asia, RIL has decided to scout for assets in Latin America, the Middle East and the Far East.
Latin America is clearly a major investment destination for RIL. "Heavy oil (found in Latin America) is good for our refineries. So, we will focus on good properties there," Prasad said.
The shift in RIL's oil and gas business strategy is also evident from the manner in which it bid under the recent Nelp-VII round. From being an aggressive bidder in previous rounds, RIL was seen submitting bids selectively under the last round. Of the 57 exploration blocks on offer, RIL bid for only two deep-water blocks (with British Petroleum), one shallow water and four on-land blocks. It was awarded only one deep-water block under that round.
Reliance recently teamed up with state-owned China National Petroleum Corporation (CNPC) and bagged a gas block in Peru. RIL's overseas arm— Reliance Exploration & Production DMCC—along with CNPC and Argentina's Grupo Pluspetrol also recently won rights to prospect for gas in Block 155 in the southern highland province of Puno, along Peru's border with Bolivia.
On June 29, RIL acquired a 10% stake in another exploration block, Lot 39, in northern Peru from Burlington Resources Inc. In May, it had teamed up with Woodside Petroleum to acquire 50% in Pluspetrol Energy SA's Block 108 in Peru. Of that stake, Reliance received 30%, while Woodside received 20%. Pluspetrol Energy will retain the remaining 50%.
RIL also acquired a 90% stake in Block 141 in Peru from Pan Andean Resources Plc in April this year. Besides Peru, Reliance has one block in the Bonaparte Basin of Western Australia, two blocks in Iraq, three in Yemen, one in East Timor and two each in Oman and Columbia.
Prasad, however, clarified that the shift in RIL's focus towards acquiring proven and producing oil and gas properties did not mean the company would stop looking at exploration blocks. "We will continue to look at exploration blocks, but selectively—only those which are lucrative and can bring some value addition," he said
Herman Hesse
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