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Reliance bids for 14 oil exploration blocks - Views on News from Equitymaster
 
 
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  • Aug 19, 1999

    Reliance bids for 14 oil exploration blocks

    According to newspaper reports, Reliance Industries Limited (RIL) has emerged as the largest private sector bidder, with bids for 14 blocks, for oil exploration blocks under the New Exploration and Licensing Policy (NELP). The company has jointly bid with a Canadian company, Nyco Resources.

    Reliance Industries (FY99 Sales Rs 14.5 bn), is India's largest private sector company. Its activities encompass polyester, fiber intermediaries, polymers, chemicals and branded textiles. The new ventures are in the core sectors of oil and gas, power and telecom.

    Reliance has been aggressively pursuing its entry into various infrastructure/core sectors that have been thrown open for private competition by the Government. While its ventures into telecom and power are unrelated to its existing businesses, the decision to enter the oil exploration business fits well within its overall framework. This is so because Reliance Petroleum, a group company, already operates a 27 m tonnes per annum refinery, the capacity of which is expected to be enhanced to 40 m tonnes per annum. The company therefore has very large crude requirements, which later could be met from within the group. This would make the Group more self-sufficient and help it to become almost entirely integrated.

    Market View:
    While some analysts have rated the stock as a 'BUY', others have continued to rate it as a 'SELL'. The reasons in favor of the 'BUY' recommendation are firstly, the upturn in the petrochemicals cycle, following the recovery in S E Asia, and secondly, the fact that the company, having completed its capex plans, is likely to generate cash this year. However, those rating it as a 'SELL' are still skeptical about the turnaround in the petrochemicals cycle.

     

     

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