Reliance no longer interested in â€کfarming-out' D6 stake

Vol 12, PW 16 (15 Jan 09) Exploration & Production
     

Reliance has abandoned plans to â€کfarm-out’ equity in D6, where it hold 90% alongside Niko Resources with 10%.

BP was the latest in a line of big ticket oil companies including Chevron, Exxon, Eni and Total that showed interest in D6. As with the others, talks with BP have gone “stone coldâ€‌, we learn.

Reliance’s decision has nothing to do with the ongoing court battle between the Ambani brothers in Mumbai, nor the credit crunch hitting new investments, but a strategy decision, pure and simple. “Everyone misunderstood the reason why Reliance wanted to â€کfarm-out’ a stake in D6,â€‌ we hear.

“Reliance didn’t need money or technical expertise. It only wanted to â€کfarm-out’ if it got something as big overseas.

That never happened.â€‌ South America, where Reliance has two blocks in Colombia and one in Peru, was an obvious destination to grow the company’s overseas business, but none of Reliance’s suitors put anything comparable to D6 on the table.

“Mid-way through the (D6) development process Reliance realised finance was not a problem, management of the field was not a problem, and that it could do both on its own,â€‌ we hear. “It was always meant to be a strategic exchange, nothing to do with D6 itself.

â€‌ Others disagree. One high-profile suitor tells this report the legal quagmire that Reliance finds itself in was instrumental in deterring serious interest.

“This is a world class asset, no doubtâ€‌ he tells us. “But globally it’s not typical for such a large asset to be surrounded by so much uncertainty that is not technical.

All the uncertainty is commercial.â€‌ This week the Mumbai High Court resumed arguments over a decision by Mukesh-owned Reliance Industries to back track on a commitment to supply 28m cm/d of D6 gas to brother Anil.

Yet to be heard, and still in legal abeyance, is a petition by NTPC, accusing Reliance of reneging on a deal to supply 12m cm/d over 17 years.