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RIL set to sell Kurdistan blocks

Mumbai, July 16: Reliance Industries Ltd (RIL) is reportedly in advanced talks to sell its stake in two oil blocks in Kurdistan to Chevron of the US in a deal that is expected to be valued at $300 million. The deal could be sealed as early as this week.

The RIL spokesperson declined to comment when quizzed on the development.

Kurdistan is a battle-scarred trouble spot and a semi-autonomous region in northern Iraq whose authorities have been battling the Iraqi government since 2005 over oil prospecting rights in the region.

RIL picked up a majority interest in the two Kurdish blocks — Rovi and Sarta — sometime in 2007. It reportedly paid the Kurdish regional government a signing amount of around $17.5 million for the two blocks at that time. It is not clear whether it paid anything more.

Details on RIL’s oil blocks in Kurdistan are shrouded in secrecy. RIL is the operator of the two oil blocks but it isn’t clear how much it actually holds.

In 2010, Reliance’s stake in the two Kurdish blocks was reduced to 80 per cent after the Kurdish government assigned 20 per cent to OMV Exploration & Production GmbH, a subsidiary of the 34-billion-euro OMV Group of Austria.

In March this year, RIL appears to have negotiated a sale of a small stake to OMV. Exactly how much was sold is not known.

Reliance’s contract with the Kurdish government apparently provided for the farm-out of a 15 per cent interest to a local Kurdish oil firm. It is not known whether this stake was sold to OMV in the March deal.

OMV acknowledges on its website that “it has non-operator interests in Rovi and Sarta”.

The Austrian oil giant has substantial oil interests in the region and operates two blocks — Mala Oman and Shorish — with the Kurdish government.

The negotiations for the stake sale to Chevron come just a couple of months after RIL closed its deal with OMV.

At present, RIL has 10 international blocks: three in Yemen (one producing and two exploratory blocks), two each in Kurdistan, Peru and Colombia, and one in Australia.

It has a total international acreage of 51,000 sq km.

The international oil blocks are managed by Reliance Exploration and Production DMCC, a Dubai-based wholly-owned subsidiary of Reliance Industries.

On March 12 this year, corporate advisory firm Ashurt LLP issued a statement in which it said it had advised OMV on the deal that was struck with Reliance Exploration and Production DMCC.

“We are delighted to have been able to work with OMV to bring this important matter to a conclusion,” Ashurst said in the statement without giving out too many details on the deal.

Cutting back

The move to sell its stake in the two blocks in Kurdistan is a clear signal that RIL is cutting back on its overseas exploration and production (E&P) business that it entered in 2005 when it first acquired rights to an oil block in Oman.

If the sale of the two Kurdistan blocks goes through, RIL will be left with just eight overseas oil and gas blocks, sharply down from the 14 blocks in its portfolio in early 2009.

Reliance Exploration and Production DMCC, established in 2007, reported a loss of Rs 384.96 crore on a total income of Rs 112.74 crore in the year ended March 31, 2012.

Reliance Industries has invested Rs 211 crore in the equity capital of Reliance Exploration and Production DMCC. It also put in Rs 3,121 crore in 5 per cent non-cumulative compulsorily convertible preference shares issued by the Dubai subsidiary.

Last year, RIL sold its majority participation interest in two blocks in Oman and one in East Timor.

“The results of seismic survey in Block-41 (Oman) and well drilling in Block-K (East Timor) were not encouraging,” RIL had said in its annual report for 2011-12.

It held 75 per cent participation interest each in these two blocks.

Last August, RIL had sold its 70 per cent participation interest in Block 18 in Oman — a 21,140 sq km concession located off the Batinah coast.

The decision to pull out came six years after RIL had signed a deepwater exploration and production sharing agreement with the Oman government for Block 18 in the Sohar Basin in June 2005.

 
 
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