Reliance Industries to form separate holding company for offshore oil assets

Reliance Industries Limited will transfer all its overseas oil assets to a new company to be called as Reliance Exploration and Production DMCC, to be headquartered in Dubai. The subsidiary will first take over the assets Reliance has secured in the West Asian countries. Modeled on ONGC’s ONGC Videsh, the investment arm for ONGC’s overseas oil assets, the new Reliance subsidiary will be the holding company for all overseas upstream assets in oil and gas. This restructuring is being done to reduce the risks on Reliance’s balance sheet as many of these oil assets are in politically risk-prone areas.

Reliance earlier had confined itself mainly to exploration and production within India, but has now taken up overseas expansion in a major way. Armed with its success in the Krishna Godavari deep waters (KG basin), the company has been looking at opportunities in oil-rich nations including Russia and Central Asian countries. The political risks in these countries are huge and exposing Reliance to such uncertainties could impact valuations. The subsidiary was floated in the third quarter of 2006-07.

Reliance has interests in exploration of overseas blocks in Yemen and Oman. It has already made oil discoveries in the onshore Malik 9 block in Yemen. The development plan for the block has been approved by the Republic of Yemen and test production commenced in December 2005. In the Oman offshore block, where RIL is the operator, the existing seismic data has been collected and 2D reprocessing of data is underway.

Read The Economic Times article.