RIL to rejig oil, gas business

To spin off drilling and exploration.

Reliance Industries (RIL) is considering spinning off the drilling and exploration operations of its oil and gas business.

The move is being interpreted as a precursor to raising funds for the logistics part of the oil and gas business.

Sources familiar with the matter said the new entity would remain a subsidiary of RIL, which might dilute its holding to raise funds for the new company.

An RIL spokesperson declined to comment.

Sources said a new company would make the RIL balance sheet immune to the huge requirements of capital to finance the logistics operations of the oil and gas business.

Besides, the company could offer foreign majors stakes in the new subsidiary. To cite a precedent, Chevron has picked up a 5 per cent stake in Reliance Petroleum.

Exploration and drilling for oil and gas requires technical know-how, as well as huge capital. Many of RIL's discoveries are located in deep waters. Also, transporting oil and gas from the fields demands heavy investments.

The new entity will join the group of two other RIL's subsidiaries "" Reliance Petroleum and Reliance Retail. Reliance allows its subsidiaries to finance their operations through their own resources without leveraging its balance sheet.

Chairman Mukesh Ambani and his associates had last week committed to chip in over Rs 16,000 crore to scale up their holdings by 4 per cent to 55 per cent.

They would subscribe to 120 million preferential warrants, which would be converted into an equal number of shares.