Reliance may spin off assets in K-G basin

Reliance Industries plans to spin off its assets in the Krishna-Godavari (K-G) basin into a separate company. The move is seen as a precursor to the induction of a strategic investor in the proposed entity.

According to sources close to the development, the spin-off would increase shareholders' value.

Reliance's natural gas reserves in the K-G basin are estimated to be more than 50 trillion cubic feet (tcf), against previous estimates of 35 tcf. However, the actual discovery may widely vary from this figure.

In case Reliance Industries decided to invite a strategic partner, Chevron would be the preferred choice, the sources added.

The US energy giant had recently acquired a 5 per cent stake in Reliance Petroleum for $300 million (nearly Rs 1,350 crore) and reserves the right to scale up its holding by another 24 per cent.

In addition to the equity alliance, Reliance Industries and Chevron are also jointly evaluating the application of refinery technology and co-operating towards setting up a technology development centre. The two firms are also slated to collaborate in other areas of the energy value chain.

Though the Reliance Industries' spokesperson was not available for comments, industry sources said the company could replicate the model it adopted for setting up its second refinery at Jamnagar at a cost of Rs 27,000 crore, for the new firm.

Reliance industries had launched a new company "" Reliance Petroleum "" and offered Chevron a 5 per cent stake before going public.

Reliance Industries is the largest exploration acreage holder among private firms in India with 34 domestic exploration blocks covering an area of 331,000 square km.

Recently, it struck gas in the K-G basin. However, the potential commercial interest of the discovery, which had been named Dhirubhai28, is yet to be established.