Business OpportunitiesMukesh Ambani's private and unlimited gold mine
Much ink has been spilt and will continue to be on who is to get the supply of natural gas from Reliance Industries’ (RIL’s) stupendous D6 find in the Krishna-Godavari basin.
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Very little notice, however, has been taken of the fact that Reliance Gas Transportation and Infrastructure Ltd (RGTIL), which set up the pipeline network for transport of this gas which has had rival users clamouring for government priority, is no longer owned by RIL, but by the latter’s chairman and managing director, Mukesh Ambani.
The change took place three years earlier and went largely unnoticed, even though RGTIL is crucial for RIL’s burgeoning gas business. RGTIL was moved out of the RIL fold to be a subsidiary of Reliance Utilities Pvt Ltd in 2006. Which is owned by Mukesh Ambani through a clutch of eight companies. The entire transaction at that time took place for only Rs 5 lakh. Even at that time RGTIL had the right of use (RoU) for setting up a major pipeline network across the country.
RGTIL has so far laid 1,400 km of pipeline to transport gas from Kakinada to Bharuch, passing through Andhra Pradesh, Karnataka, Maharashtra and Gujarat, at an investment of $4 billion. It is also in the process of implementing four pipelines that will interconnect with the east-west network. These are the 1,100 km Kakinada-Haldia, 600 km Kakinada-Chennai, 670 km Chennai-Tuticorin and the 660 km Chennai-Bangalore-Mangalore pipeline networks.
RGTIL is estimated to be earning an average revenue of $1 per mBtu (million British Thermal Units) from gas transportation to RIL’s customers in the fertiliser and power sectors. When the company would transport the entire KG Basin gas of 80 million metric standard cubic metres a day (mmscmd), it is likely to earn revenues worth $2-2.5 million a day, said an analyst. The net asset value of RIL’s gas business, based on just the production profile of D6, is estimated at $19.98 billion, assuming a sale price of $4.2 per mBtu.
An official spokesperson of RIL did not respond. Justifying the transaction, however, an executive said since RIL’s only investment at that time in the company was Rs 5 lakh as equity and RGTIL did not have any other assets, the company was “desubsidiarised” after the payment of the amount. He said regulatory caps on returns on investment in the pipeline business were not attractive for the group as a whole and so, it was decided to move the company out of the RIL fold.