The Hindu Business Line : Reliance, IOC to go slow on city gas venture

New Delhi, Dec. 26 Reliance Industries Ltd (RIL) and Indian Oil Corporation Ltd (IOC) have decided to go slow on their proposed joint venture for city gas distribution.

“The two companies have decided to wait for the final guidelines for development of city or local natural gas distribution networks before formalising their joint venture,” sources said.

The draft guidelines put out by the Petroleum & Natural Gas Regulatory Board (P&NGRB) have proposed calling bids for the projects.

“This creates a situation of uncertainty. Therefore, RIL and IOC have decided to go slow. Even if the two entities make a bid as a consortium, there is no guarantee that they will win the projects,” sources said.

“Though consensus on issues like equity structure of the joint venture seems to be emerging, the two companies want to go slow till more clarity emerges on the policy front,” sources said.

While RIL has been seeking a majority stake in the joint venture, IOC wanted an equal partnership. The original proposal envisaged 49 per cent equity for IOC and 51 per cent for RIL.

It also proposed that if any State Government expressed interest in a city gas distribution project, it would be given five per cent in such a way that the combined strength of IOC and the State would not be more than 50 per cent.

However, the IOC board had opposed the PSU major taking a minority stake (49 per cent) in the project.

“Now, the two companies are expected to have equal partnership,” sources added. The joint venture is expected to leverage availability of gas from Reliance’s huge find off the Andhra coast and IOC’s extensive retail outlet network.

“Once clarity emerges on the policy front, the two entities would enter into a general MoU, which would form the basis of the projects,” sources said.

The two companies would then set up a Steering Committee to identify the cities for setting up distribution networks for piped natural gas to households and industries. The areas of co-operation include use of existing retail outlets for marketing CNG and LPG used by automobiles.

Related Stories:
IOC may partner Reliance for city gas distribution

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page