Reliance keen on mega petrochem plant in Russia

Reliance Industries is keen establish its presence in Russia and is seeking opportunities in the downstream oil & gas space. According to reports, company chairman Mukesh Ambani is scheduled to meet Russian president Vladimir Putin who is now in New Delhi.

Mukesh Ambani has reportedly even cancelled his trip to Davos for the World Economic Forum summit to be in Delhi, which indicates the importance he attaches to the meeting with Putin.

Reliance Industries is expected to propose setting up of a large petrochemical complex to the Russian government, according to industry sources. The company may also seek a natural gas block to feed the petrochemical plant. Reliance is also likely to indicate its willingness to set up a new refinery or acquire and modernise an existing refinery to convert gas into naphtha and feed the petrochemical unit.

To win the backing of Russian government, Reliance is also reportedly willing to accept Russian government-owned oil companies like Gazprom or Rosneft as partners in the venture. The Russian government under President Putin is following a policy of establishing government control over the country's energy assets through state-owned companies. Western oil companies like Shell and BP are facing increased pressure to yield space to Russian government companies. Even Russian private entrepreneurs in the oil and gas sector have faced the heat.

A manufacturing base in Russia would further open up the vast European market for plastics and other products for Reliance Industries. The company already has a modest presence in Europe through polyester manufacturer Trevira in Germany, which was acquired in 2004 for nearly Rs450 crore.

More importantly, a manufacturing base in Russia would provide Reliance strategic presence one of the largest energy producing countries in the world. Russia has one of the largest energy reserves, outside of OPEC members and has emerged as a key exporter of oil and gas. Over time, the company may be in a position to seek opportunities in upstream oil & gas exploration and oil refining in Russia.

ONGC is already a partner in the vast Sakhalin oil field in Siberia. Oil from Sakhalin is expected to start reaching ONGC from this year and the company is now seeking participation in the next phase of development in Sakhalin.