Reliance Energy set to enter exploration business

Vol 9, PW 23 (09 Mar 06) People & Policy

Reliance Energy is the latest power generation company in India after NTPC to announce its intention to enter the exploration and production business.

It makes sense to source your own gas for captive power generation, reveals a source. In the long term buying gas will be a problem if you have expansion plans.

LNG is expensive. Owned by Anil Ambani, younger brother to Mukesh Ambani, Reliance Energys maiden entry into the upstream business will be through the NELP-VI licensing round whose first roadshow will be held in Delhi (tomorrow) on 10th March.

Gas-prone blocks will be a priority, adds a source. Money wont be a problem.

Reliance Energy is a $2bn company. For now Reliance Energy has only a skeleton staff of people with upstream experience but this is likely to change as it begins poaching geologists, geophysicists, petroleum engineers and others from rival state owned and private sector companies as plans firm up in the weeks ahead.

Reliance Energy will only be recruiting experienced personnel, we hear. It wont take freshers.

JP Chalasani, Reliance Energy business development director, himself a former NTPC staffer and close confidant of Anil Ambani, is overseeing the new upstream strategy from the companys offices at Nehru Place in Delhi. Another priority will be to find a partner with upstream experience as an operator.

On its own Reliance Energy doesnt qualify and wont be able to bid, we learn. It will be looking for a partner with experience.

Reliance Energy is in the same position as Reliance Industries was when it was just a textiles company venturing into the upstream oil business. Fears that the new Reliance Energy upstream division might be in breach of a non-compete clause signed by the Ambani brothers during the break-up of their fathers empire are unfounded.

If the gas is used for captive power generation there is no problem, we learn. But if any gas is left over for sale in the market then Reliance Industries has first right of refusal.