Reliance Industries (RIL) chairman Mukesh Ambani is looking to sell Reliance Gas Transportation Infrastructure, a business that builds pipelines to carry natural gas across the country, The Wall Street Journal reported, citing people familiar with the matter.
The company has contacted bankers to help Ambani sell the business and the process is at an early stage, the newspaper said.
Two people familiar with the matter said the privately-owned gas pipeline business could be worth around $1 billion, it said.
?We do not comment on market speculation,? an RIL spokesman told Reuters when asked about the report. Shares of the company fell 1.91% on the BSE on Monday to close at R729.82 each.
RIL began production of natural gas from its Dhirubhai-1 and 3 (D1&D3) fields in the Krishna-Godavari basin, the largest among the 18 gas and one oil find, in April 2009 but output has fallen from a peak of 54 million cubic metres per day in March 2010 to 28.16 mmcmd this month.
Together with 6.46 mmcmd of gas production from D-26 or MA oil field in the same area, block output is 34.62 mmcmd.
In February, British oil giant BP Plc agreed to buy a 30% stake in 23 oil and gas blocks owned by Reliance Industries, for $7.2 billion.
RIL and BP made a presentation to petroleum secretary GC Chaturvedi on March 16 detailing ?an integrated and capital-efficient plan for block development,? news agencies said.
The duo projected first gas from R-Series, the third largest gas find in the eastern offshore KG-DWN-98/3 or KG-D6 block, by 2015 and production from satellite fields by 2016 subject to timely regulatory approvals.
Large oil companies which have traditionally owned pipelines are looking to exit the business and follow an outsourced model, since laying pipelines is extremely capital-intensive.
Cash-strapped public sector oil marketing companies like Bharat Petroleum, Hindustan Petroleum and Indian Oil Corporation which are losing heavily on selling petrol, cooking gas and kerosene below cost are planning to outsource pipelines by tying up with third party infrastructure and logistics companies on a ‘build-and-operate’ basis.
?Sometimes, inter-company rivalry results in companies laying pipelines for their own use, but in such cases, capacity utilisation will be hardly 30-40%,? K Ravichandran, senior vice-president and co-head, corporate ratings at ICRA, a ratings agency said earlier. ?Outsourcing can be an innovative model.?
The Petroleum & Natural Gas Regulatory Board which regulates laying of pipelines and city gas distribution networks, has been encouraging the use of shared pipelines.