Shirish Nadkarni
OGJ Correspondent
MUMBAI, Mar. 23 -- Despite being a relatively recent entrant to the world of oil exploration and production, India's largest business conglomerate, Reliance Industries Ltd. (RIL), has declared it will not offer equity stakes in any of its existing or future gas fields to foreign energy majors that offer technologies to develop deepwater gas fields.
Reliance recently announced large commercial gas discoveries on Krishna Godavari (K-G) and Mahanadi basin blocks, where recoverable gas reserves are estimated at close to 20 tcf.
By contrast, other Indian companies—state-run Oil & Natural Gas Corp. (ONGC) and Gujarat State Petroleum Corp. (GSPC) —which also have announced significant gas discoveries on the east coast, are willing to offer foreign companies equity stakes of 10-30% in their recently discovered K-G basin gas fields.
Both GSPC and ONGC are in talks with leading oil and gas companies ExxonMobil Corp., ENI SPA, BG Group, Royal Dutch Shell PLC, and BP PLC for the requisite technological know-how for developing their gas fields, although India's Ministry of Petroleum and Natural Gas recently denied approval for one such deal between ONGC and BG (OGJ Online, Jan. 26, 2007).
GSPC is close to short-listing an appropriate technical partner for its deepwater gas discovery, while ONGC too is engaged in discussions with leading players.
Reliance's strategy
Reliance said it is building its own in-house technical expertise to develop and produce gas from technical-intensive deepwater blocks.
Giving details of his group's strategy in this regard, the head of Reliance oil and gas business PMS Prasad said Reliance had already spent nearly $500 million to help its experts acquire the latest technical skills from various vendors, service providers, and engineering companies to develop and produce gas from its D6 field in the east coast K-G basin.
Gas production from Reliance's D6 block is scheduled to begin in June 2008. Reliance has contracted Transocean to carry out the drilling of wells on the block. It also hired the services of leading technology companies Halliburton and Schlumburger and contracted third party experts to interpret data and train Reliance personnel to develop and produce the gas on its own.
"We are quite clear that we will not offer stakes in lieu of technical support," said Prasad. "Even in the 1970s, when we had set up our Patalganga polyester project, we rejected offers from foreign multinationals to give technology in lieu of a stake in the project."
Prasad said, "We have paid a hefty price to acquire the latest technology for the plant, but no equity was offered at the time. The same philosophy continues. Also, we have no immediate plans to hive off our E&P business into a separate entity."
On Reliance's agreement with Chevron Corp. for a stake in K-G basin fields, Prasad said, "If at all it happens, it will be in lieu of our picking up a stake in a similar prestigious field of Chevron."
Prasad said Chevron's 5% stake in Reliance's new Jamnagar refinery, too, was in exchange for use of Chevron's huge oil marketing network in overseas markets.
"Therefore, only in case of synergies to RIL's businesses, will the company offer equity to a foreign oil and gas company," he said.