Reliance Industries, which had 12 conventional oil and gas blocks overseas, today is left with only seven, and this number could go down further. The company acquired its first overseas asset in 2007.
The company said it took a conscious decision to consolidate after reviewing its exploration and production (E&P) strategy. Initially, Reliance was acquiring only exploration acreages across the geographies, from Peru to Australia.
Now, it wants to make big investments but restricted to one or two regions, an official in know of the developments said. Reliance now wants to look at acquiring participating interests in already discovered areas. “Handling scattered business across geographies, doing seismic surveys, collecting data weremore expensive than making a huge investment in one-two regions and managing them,” those tracking the industry told Business Line.
Reliance had acquired exploration acreages mainly because participating interests in already developed fields came at a premium. Most of the acreages were acquired through the bidding rounds, the official said.
Besides, the company has acreages in areas which fall in ‘no-contact’ region, which would make exploration activities difficult. Consolidation will also help the company manage better and maximise investments, industry observers said.
Enthused by its shale gas experience in the US, Reliance wants to adopt a similar method for conventional assets, an official said. Reliance’s cumulative investment in shale gas assets in US is over $3.5 billion.
Says Aashish Mehra, Partner and Managing Director, Strategic Decisions Group, a US-based strategy consultancy firm: “The company’s top management needs to appreciate that the exploration and production business is unlike most of their other businesses. It’s a highly decision-intensive business. It’s not possible to improve the value potential of a poor decision through better execution, which you can in their other businesses.”
Today, Reliance, through its Reliance Exploration & Production DMCC arm, has seven oil and gas (conventional) overseas blocks.
It has assets in Yemen (two), Peru (two), Australia (one) and Colombia (two). Besides, the company has one uranium exploration block in Australia and shale gas assets in the US.
Reliance has relinquished or exited blocks in East Timor (one), Oman (one), Kurdistan (two), and Yemen (one).
To focus on acquiring participating interest in already discovered areas.