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Reliance scouts for US refineries

New Delhi, June 12: The Mukesh Ambani-run Reliance Industries is eyeing stakes in refineries in the United States and West Asia to increase its presence overseas.

Reliance has stakes in oil exploration blocks in Yemen and Oman, and is also looking to acquire similar assets in Peru and Colombia, P.M.S. Prasad, CEO and president of the company’s oil and gas business, said today.

The company operates India’s largest refinery at Jamnagar in Gujarat, and is setting up another 30-million-tonnes-a-year refinery mainly for the export market.

Prasad said there were opportunities overseas to expand its refining expertise, but he declined to give financial details or identify likely targets.

The Yemen field has a production rate of 2,000 barrels per day and is expected to peak at 20,000 barrels a day later this year. The company has carried out a seismic survey in the Pacific Ocean off the coast of Colombia. The company also has an exploration block in East Timor, which is considered rich in hydrocarbons.

Recently, RIL announced that it had consolidated operations by transferring the international exploration portfolio into a wholly owned subsidiary, Reliance Exploration and Production (REP) DMCC, incorporated in Dubai. The exploration and production segment currently makes a small contribution to RIL’s topline. This will, however, rise dramatically after production starts at the KG basin.

RIL, however, is a major exporter of petroleum products. Last fiscal, its exports crossed $15 billion. Reliance hopes to finalise the price of the gas set to flow from the deep-water gas block in Krishna Godavari basin by end-July, well ahead of production scheduled to begin by mid-2008, Prasad said.

“The gas price has to be ready by July-end. As a rule, we should have it ready 12 months before starting commercial production,” he added. However, he did not divulge the expected price of the gas.

The gas is expected to flow at a rate of 30 to 40 million cubic metres a day from July 2008, and will peak at 80 million cubic metres a day in 2009.

The ministry has received RIL’s proposal on the gas price. The government’s approval is required under the terms of production sharing contract. Since the government has a share in the profit of the gas field, it has to determine whether the best price is being set for the gas.

Last week, the government said the price of gas should be determined through a system of competitive bidding from potential consumers.

However, younger sibling Anil Ambani has moved court against Mukesh-run Reliance Industries accusing the company of not honouring a gas supply contract with his company, Reliance Natural Resources Ltd, that was reached under a family settlement that carved up the Dhirubhai empire in January 2006. The government has questioned the low price of gas stipulated in the mutual settlement between the two brothers.

The government’s main objection is to the gas price which, at $2.34 per million British thermal unit (mbtu), is substantially lower than the prevailing international price of around $8 per mbtu.

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