Chevron picks up 5% in RPL for Rs 1,320 cr

US major may increase stake to 29% later.

Chevron Corporation, the fifth largest integrated energy company in the world, today signed an agreement with Reliance Industries to pick up 5 per cent stake in Reliance Petroleum Ltd (RPL) for $300 million (nearly Rs 1,320 crore).

The deal "" the first acquisition of stake by a global refinery company in an Indian firm "" also provides flexibility to the foreign company to ramp up its holding to 29 per cent.

At this price, Chevron is expected to pump in $1.74 billion for acquisition of a 29 per cent stake in RPL. If the deal takes place a couple of years later, its size may surpass $ 2 billion, making it the largest foreign direct investment in the country. If it happens, RIL will hold 51 per cent stake in RPL. The remaining 20 per cent will be held by public.

The sources said the alliance between the two companies would be expanded later ""Chevon and Reliance could team up for large global oilield and refining projects also.

Chevron India Holdings Pte, the Singapore-based wholly owned subsidiary of the $ 193.6 billion Chevron, is picking up 220 million shares at Rs 60 apiece, which represents a 5 per cent stake in the post-initial public offer (IPO) equity of RPL. RIL will hold 75 per cent in RPL after the IPO.

RIL and Chevron today also signed two memoranda of understanding. The first MoU sets out the principles of partnership by which RIL and Chevron plan to optimise the crude oil supply and product offtake and marketing of the RPL refinery being set up in the special economic zone of Jamnagar in Gujarat.

Under this MoU, RIL and Chevron will jointly evaluate application of mutually selected refinery technology as well as setting up a technology development centre in India.

The second MoU sets out the intent of both companies to collaborate in other areas in the energy value chain including exploration.

RIL Chairman and Managing Director Mukesh Ambani said in a press release, "The agreement and MoUs will be the first step in establishing a strong partnership with one of the world's largest and most respected companies."

Chevron Chairman and Chief Executive Officer Dave O'Reilly was quoted in the release as saying, "this underscores the importance of Asia to Chevron generally and India specifically."

The Chevron deal followed a private placement of 450 million shares to a clutch of investors and preceded RPL's initial public offering of 1350 million shares.

RPL's 29-million-tonne (mt)-per-annum refinery plans to export jet fuel, diesel, gasoline and alkylates to North America and Europe.

The funding of the Rs 27,000 crore unit, which is to Reliance Indutries' existing 33 mt refinery, is being done through debt of Rs 15,750 crore and equity of Rs 11,250 crore, including proceeds from the IPO.

With the commissioning of this unit in August 2008, Reliance will have a refining capacity of 62 million tonnes in Jamnagar, 28 per cent larger than Petroleos de Venezuela SA's Paraguana refinery, the world's biggest as of today.