New Delhi: In what may be the first joint venture company to be formed by Reliance Industries Ltd (RIL) and Indian Oil Corp. (IOC), India’s leading refiner has stepped up efforts to team up and market RIL’s gas from the Krishna-Godavari basin.
“The talks with RIL are still on,” said B.M. Bansal, IOC’s director of planning and business development. “Within the next one month, a decision will be taken. Right now, we are talking about going in, jointly, for distribution of compressed natural gas (CNG), pressurized natural gas (PNG) and industrial gas. The JV will do the marketing for the gas and we are looking at the entire Indian market.” A RIL executive, who did not wish to be identified, confirmed the talks.
Arvind Mahajan, executive director at accounting firm KPMG, said, “It’s very interesting as RIL has never gone for a JV before, as its approach has been to build its own capabilities. Let’s see how it pans out.”
Such an arrangement will be helpful for both RIL and IOC. IOC’s advantage is the location of its CNG outlets, which are within cities unlike RIL’s fuel outlets, which are mostly on the highways. RIL’s advantage is its assured supply of gas from its own gas blocks in the KG basin. “To market auto CNG, the outlets have to be within cities,” notes Mahajan.
While IOC already has a tie-up with GAIL (India) Ltd, the proposed JV with RIL will not compete with it as the GAIL tie-up is exclusively for city gas distribution in Uttar Pradesh and eastern India. “We plan to cover the entire spectrum of home and industrial users in areas for which we do not have a tie-up with GAIL,” an IOC spokesperson added.
RIL has said it found gas in the KG D1 and D3 deep-water blocks in the KG basin with estimated reserves in the blocks close to 11.2 trillion cubic feet. RIL plans to sell 40 million metric standard cubic metre per day (mmscmd) of gas from mid-2008 and ramp up production to 80mmscmd by mid-2009.