Oil&Gas Eurasia Blog

Reliance Industries‘ eastern offshore KG-D6 gas has helped fertilizer companies bring down cost of urea production by 18 per cent and has helped save about Rs 4,760 crore in fertilizer subsidy.

According to the Fertilizer Industry Coordination Committee (FICC), the average provisional cost for urea production in 2009 has come down from Rs 13,509 per tonne to Rs 11,084 per tonne after KG-D6 gas replaced costlier alternative fuels like naphtha.

FICC informed Fertilizer Ministry that the energy cost has reduced as a result of use of RIL gas replacing costlier alternative, sources said.

RIL is currently producing about 55 million standard cubic meters per day of gas from its Krishna Godavari basin fields. Of this over 13 mmscmd is currently being supplied to 15 units producing about 19.7 million tonnes a year of urea.

The company has achieved peak production rate of 80 mmscmd but had to scale back the output as its government-nominated customers were not drawing their allocated quota of gas.

Source: PTI

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http://oilandgasindia.blogspot.com/2010/01/reliance-gas-helps-save-rs-4760-cr-in.html

Andhra Police Book TV Channel for Report on YSR’s Death 

Less than a day after retail outlets owned by the Ambani brothers, Mukesh and Anil, were attacked by YSR loyalists across Andhra Pradesh following the telacast by a Telugu news channel of a report alleging foul play in the death of the former chief minister, the Centre was confronted with disturbing pieces of information which, taken together, suggested that the assault on the business establishments late last night could be the result of factional infighting within the Congress’ state unit.

The attack on the business outlets owned by the two Ambani brothers, it is felt, were pre-meditated and orchestrated by a section of the state Congress leadership. No sooner had the report been telecast, attacks were reported simultaneously from several places in Andhra Pradesh, including Hyderabad. The Congress, however, tried to play it safe, inisisting that it was a “sensitive issue,’’ and that the investigative agencies have to look into it. “We are awaiting a detailed information,’’ party spokesman Shakeel Ahmad said in response to persistent queries. The report telecast by TV5, which was attributed to a Russian website, alleged that the Ambani brothers were behind the helicopter crash in which Y S Rajasekhara Reddy was killed on September 2 last.

The Andhra police have filed a case against a Telugu news channel over the report, and have already begun their probe. They were in the process of collecting evidence, including video tapes of the news footage beamed by TV5. Mukesh-led Reliance Industries, in the meanwhile, have denied the allegations and called them “malicious’’ and `motivated’’ and said that it was the “dirty handiwork of our business rivals in cohoots with TV5.’’

The Anil Ambani-led Reliance group too joined in the condemnation. “A malicious and criminal disinformation campaign has been engaged into by our corporate rivals leading to substantial loss and damage to our several offices and businesses of Reliance ADA Group in Andhra Pradesh on Thursday evening,’’ a statement issued by the group said, adding, “We are shocked to see our corporate rivals stooping down to new levels of desperation by engaging in such imaginative and baseless rumour-mongering.’’

“We are confident that the authorities would take appropriate action against those corporate elements engaging in such criminal acts of disinformation,’’ it said further. According to a senior police official, a case has been registered suo-motu against the Telugu news channel TV5. Andhra Pradesh DGP R R Girish Kumar termed the attacks on Reliance outlets as “unfortunate’’ and warned that they will deal tough with arsonists.

Source: http://economictimes.indiatimes.com/news/politics/nation/Attack-on-Ambanis-outlets-may-be-result-of-Congress-feud/articleshow/5426351.cms

The violence against Reliance group, allegedly provoked by a news telecast claiming the business giant got Y S Rajasekhara Reddy killed in a helicopter crash, has triggered unrest in Congress with fingers pointing at Jaganmohan Reddy. While the Telangana faction of the party accused Jagamohan faction of trying to derail division of Andhra Pradesh, others felt it was only an attempt to show that chief minister K Rosaiah was not fit to steer a difficult situation as well as to block the process of formation of Telangana.

The fresh incident in Congress-ruled state, which is mired in controversies since YSR’s death four months ago and is having to deal with the incendiary issue of bifurcation, threatens to stoke factionalism and power struggle, which anyway has brimmed over.

The state police on Friday filed an FIR against the TV channel which aired the news. The probe may have implications for state Congress, especially as the Union home ministry appeared to be in line with the assessment that sudden eruption had to do with factional feud in Congress. A top source called it “intra-party conflict”.

Insiders say the give-away in the ostensible spontaneous reaction of YSR followers to revelation that his accident was a murder, is the basis of the claim. The local TV channel picked the murder theory from a Moscow based website four months after it was posted. The news story is said to have led irate Congressmen to target Reliance offices in Hyderabad, Kadapa, Vijaywada, Eluru and other places.

Source: TOI

The TV report referred to an article written by one Mark Ames , a California-born American journalist and writer, on a website, exiledonline.com titled ‘Enemy of Larry Summers Ex-Boss Dies in Mysterious Helicopter Crash.’ Summers is currently director of the White House’s National Economic Council for President Barack Obama. According to Ames, Summers worked for Mukesh Ambani, head of Reliance Industries Limited, right until he took the White House job.

After moving to Moscow in 1993, Ames started a magazine titled The Exile. In June 2008, he fled the Russian capital to Panama after being pursued by the authorities and continues to run The Exile online. The said article appeared on the website on December 31, 2009, and was flashed by the TV channel on Thursday evening.

In the article, Ames states that even as the Ambani brothers were feuding, the Andhra Pradesh government sought its due share of the hydrocarbon asset. He said YSR also attacked their mother, Kokilaben, who brokered the deal dividing up the business empire between her feuding sons. According to Ames, after saying that the gas dispute cannot be left to the mother and seeking the Centre’s intervention, YSR died in a mysterious helicopter crash.

Within minutes of the TV channel airing the report, Congress workers took to the streets all across the state and attacked all business establishments which had the name Reliance on them.

Source : //en.wikipedia.org/wiki/Mark_Ames

“We are shocked and outraged at the false, malicious, motivated and libelous news on TV5 channel concerning the fatal mishap of Shri Y. S. Rajasekhara Reddy’s helicopter.

We condemn, rebut and reject the allegation with the contempt it deserves. It is the dirty handiwork of our business rivals in cohoots with TV5. This is also evident from the well coordinated attacks on RIL’s personnel and establishments in Andhra Pradesh within minutes of the telecast by TV5.

The channel has thrown all journalistic norms to the winds to malign the reputation of RIL, which has made significant investments in Andhra Pradesh to promote the development of the state and the nation. RIL is a law abiding corporate citizen. We mourned the untimely and tragic death of Shri Y. S. Rajasekhara Reddy as much as anyone else.

However, we cannot and will not let this criminal attempt by TV5 to besmirch our reputation. We will file a criminal complaint against the channel. We also demand that the central and state governments initiate an immediate investigation into these despicable acts and bring the culprits to justice.” -Spokesperson, Reliance Industries Ltd.

Source: www.RIL.com

Reliance Industries, which has proposed to invest $1.5 billion more in developing satellite gas finds in the prolific KG-D6 block, will drill six wells this year.

“Six additional exploration/appraisal wells will be drilled this year,” said Niko Resources, the junior partner in RIL-operated KG-D6 block.

Niko, which holds 10 per cent interest in the block, did not give any further details in the operational update it released today.

RIL has till date made 19 discoveries– 18 gas and one oil–in deep-sea block KG-DWN-98/3 or KG-D6. Of these, it developed Dhirubhai-1 and 3 gas fields in the first phase at an investment of $8.836 billion.

It has now proposed to invest another $1.5 billion in bringing to production four satellite finds in the block.

Dhirubhai-1 and 3 fields, which began gas production in April last year, hold 10.03 Tcf of reserves and are currently producing about 60 million standard cubic meters per day. The peak output of 80 mmscmd likely this year, would double gas availability in the country.

The Mumbai-based firm had in July 2008 proposed to develop 9 discoveries adjoining these two giants at a cost of $5.91 billion. But after more techno-commercial viability studies, it decided to narrow down to four finds that can be put to production in next 4-5 years.

RIL on December 29 submitted a field development plan (FDP) to the Directorate General of Hydrocarbons (DGH) for the four discoveries that it estimates hold 0.6 trillion cubic feet of recoverable reserves, sources said, adding 10 mmscmd of production is envisaged from these fields for six years.

Originally, the nine satellite finds were estimated to hold 2.2 Tcf of in-place gas reserves.

Niko said at least one additional exploration well is planned in the Mahanadi basin block NEC-25, off the Orissa coast. RIL has made six gas discoveries in this block.

Source: PTI

For further information, please visit
http://oilandgasindia.blogspot.com/2010/01/ril-to-drill-six-new-wells-in-kg-d6.html

The proceeds from selling treasury stock will add to RIL’s cash and help its big acquisition plans.

The sale of a part of Reliance Industries’ (RIL) treasury stock through a block deal on the bourses inaugurated trading in 2010. RIL garnered almost Rs 2,675 crore by selling 25.85 million shares (held by a trust, owned by a RIL subsidiary) to LIC at an average price of Rs 1,035 per share or a 5 per cent discount to the previous closing price. The discount isn’t unusual, say analysts, given the size of the deal.

However, the price is lower than the sale price of Rs 2,125 (pre-bonus and pre-dividend) of the earlier deal done in mid-September 2009, when RIL had raised Rs 3,188 crore by selling treasury stock to institutional investors.
With the latest move, RIL has added to its cash kitty (of Rs 19,421 crore as on September 2009), which it could use for its estimated $12 billion bid for petrochemicals’ major Lyondell Basell and exploration projects. If required, RIL could also tap the remaining treasury stock of 333.85 million, valued at Rs 36,000 crore.

The markets, however, were not impressed. Over two days, the stock lost 1.8 per cent as against 1.3 per cent gain in the Sensex. Notably, the stock has also underperformed the markets since mid-September — down by about 2 per cent as against Sensex’s 7.5 per cent rise. The underperformance can be attributed to factors like pending gas dispute with RNRL, overhang of its bid to acquire Lyondell and uninspiring performance.

While analysts believe that RIL’s gross refining margins (GRMs) have in all probability bottomed out and should stay above the lows touched earlier, the petrochemical business may remain under pressure in the medium term till demand picks up.
The buffer for the stock is, however, on the exploration front. Last month, RIL hit a gas gusher with three reservoir zones in the D-3 block of Krishna-Godavari (KG) basin. This heralds its third consecutive find in this block, in which RIL owns 90 per cent stake and UK-based Hardy Oil 10 per cent.

While the regulators’ decision on commerciality of the block is awaited, analysts say that Hardy had earlier indicated prospective resources of 695 million barrels of oil equivalent. Based on RIL’s stake in the D3 block, analysts have pegged its value at Rs 21-30 per share.

This find emphasises eastern India’s offshore potential where RIL has 10 blocks in the KG basin and 8 in the Mahanadi basin. Currently, RIL has one rig operational in an exploration block in Oman and three rigs in India (in D6, D3 and Cauvery Basin). It is expected to add two more in 2010, which indicates that RIL’s exploration activities are likely to pick up in the current year.
The ramp-up in production from the KG-D6 block is the main focus currently; it recently achieved a flow rate of 80 million standard cubic metres. The KG-D6 block is valued at Rs 241 per share in terms of oil production and potential upsides. RIL’s other fields such as NEC-25, CBM Sohagpur and D9 are valued at Rs 226 per share, as per an India Infoline report.

At Rs 1,069.55, the stock trades at about 14 times 2010-11 estimates. Two key factors loom over the stock — the outcome of the court case judgement due in the next couple of months and the Lyondell acquisition bid. Positives on these fronts and new oil and gas discoveries will act as a trigger for the stock in the near-to-medium term.

Sources: Business Standard
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http://oilandgasindia.blogspot.com/2010/01/reliance-industries-filling-its-coffers.html

Reliance Industries on Monday raised Rs 2,675 crore selling shares held by its treasury to build a war chest probably to buy the bankrupt petrochemical major LyondellBasell, for which it may have to pay over the odds, as the global economic recovery brightens the prospects for even bankrupt companies.

The country’s largest private sector company sold 25.85-million treasury stocks — created eight years ago following the merger of Reliance Petroleum with RIL — to state-owned Life Insurance Corporation, which is the largest institutional shareholder in the company with a six per cent stake.

RIL, which has submitted a non-binding bid to buy a controlling stake in the Rotterdam-based Lyondell, has been raising funds, as analysts estimated it to value the target at around $12 billion when it had first made public on November 21 its intention to buy the bankrupt petrochemical company. Subsequently, Lyondell submitted a revised plan on December 24 to the bankruptcy court in the US.

The plan involves a $2.8-billion rights share sale and conversion of about $18 billion of debt into equity, which analysts believe may force RIL to raise its bid beyond the estimated $12 billion.

The latest share sale, the amount of treasury stock in its vaults and its relatively low debt, could help RIL raise the bid without much struggle to fund the takeover, analysts said.

“RIL holds another 343 million treasury stocks, valued at nearly $8 billion at the current market price, and cash and cash equivalents worth $4.65 billion,” said Maulik Patel, head of research at KR Choksey Securities.

“RIL’s net debt to equity of 0.4x gives ample opportunity to leverage its balance sheet. We calculate RIL can borrow another $11 billion to remain within debt / equity ratio of 1.0x and will have $23.7 billion financing available.”

RIL confirmed the share sale at an average price of Rs 1,035 apiece, five per cent lower than Thursday’s closing. This is the second treasury stock sale in less than four months. In September, it raised Rs 3,188 crore selling 15 million shares. RIL ended the day 1.2% lower at Rs 1,075 on BSE. Citigroup and Bank of America-Merrill Lynch were arrangers for the share sale.

Even as the Lyondell battle is fought in the bankruptcy courts, there could be other targets for RIL, says a banker familiar with the company’s strategy.

The unsecured creditors of Lyondell opposed the reorganisation plan, which keeps the doors open for RIL. The deadline for other stakeholders to challenge the reorganisation plan is Tuesday, but RIL can’t oppose.

RIL had started back-room discussions with the secured and unsecured creditors of Lyondell as it finalises an official financial bid, a person close to the matter said, but did not provide a timeline for it.

But it may be a long-drawn affair in the US courts, as Lyondell officials, who did not want to be identified, said that RIL’s reported $12-billion bid may be too low.

“We don’t think RIL’s initial bid has any merit,” an official at Access Industries, promoted by Russian-born billionaire Len Blavatnik, told ET in early December. The value was “too low”, he had said.

Apollo Management, an affiliate of Access Industries, and Ares Corporate Opportunities Fund are among firms committed to buy shares in the rights offer.

LyondellBasell was formed in December 2007 when Basell, a unit of billionaire Len Blavatnik’s Access Industries, paid $12.7 billion for the Houston-based Lyondell Chemical.

LyondellBasell could create long-term synergy for RIL due to its technological capability, wide distribution and larger bargaining power of the combined entity, said KR Choksey’s Mr Patel.

Reliance Industries Ltd (RIL) has proposed to invest an additional $1.5 billion in bringing to production four gas discoveries adjoining its prolific gas fields in Krishna—Godavari (KG) basin in the country’s east coast.

RIL had in July 2008 proposed to develop nine satellite discoveries in the Krishna Godavari basin block at a cost of $5.91 billion, but later narrowed it down to four finds that can be put to production in the next 4-5 years.

The company last week submitted a field development plan (FDP) to the Directorate General of Hydrocarbons (DGH) for the four discoveries that it estimates hold 0.6 trillion cubic feet of recoverable reserves, Government sources said.

RIL officials did not respond immediately to the queries about the investment. The company, the sources said, plans to produce 10 million standard cubic metres per day of gas from the four fields for 6 years.

RIL has till date made 19 discoveries in deep-sea block KG-DWN-98/3 or KG-D6-18 gas and one oil. Of these, it developed Dhirubhai-1 and 3 fields in the first phase. The two fields, which began gas production in April, last year, hold 10.03 Tcf of reserves.

The company has so far invested $5.8 billion out of the estimated $8.836 billion cost of developing D1 and D3 fields over their entire life. The fields are currently producing around 60 mmscmd of gas and envisage a peak output of 80 mmscmd next year.

Source: hindu Business line
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http://oilandgasindia.blogspot.com/2010/01/ril-may-invest-15-billion-more-on-kg-d6.html

Mukesh Ambani-run Reliance Industries today said it has successfully tested the design capacity of its massive eastern offshore Krishna-Godavari basin D6 field production facilities.

“A flow rate of 80 million standard cubic meters (the peak production envisaged from KG-D6 fields) was achieved through the KG-D6 facilities and delivered” to the pipeline, a company statement said here.

RIL, which is currently producing about 60 mmscmd gas from two of the 18 gas discoveries in the KG-D6 block, has put deep-sea production facilities to produce 80 mmscmd. These facilities were successfully tested last week.

“Within a month of emerging as the largest producer of natural gas in the country, RIL announces that it has successfully carried out an assessment of the design capacity of the KG-D6 deepwater gas production facilities on December 23,” the statement said.

80 million units of gas was delivered to the Reliance Gas Transportation Infrastructure Ltd — the firm that owns the East-West pipeline that transports the KG-D6 gas from Kakinada on the Andhra coast to Baruch in Gujarat.

“At present, RIL is producing about 60 mmscmd of gas which is being supplied to several priority sectors identified by the Government under its Gas Utilisation Policy,” it said.

Source: Economic Times

For further information, please visit:

http://oilandgasindia.blogspot.com/2009/12/ril-successfully-tests-its-peak-output.html