Mukesh Ambani led Reliance Industries Limited (RIL) has chalked out plans to set up a Special Purpose Vehicle (SPV) in an effort to invest in its shale gas ventures, with an initial investment of $1.5 – 2 billion into this SPV.
The official announcement of this venture is likely to be made on June 3 at RIL’s annual general meeting. Until then, RIL is in talks with RBI for getting requisite permission and clearances for the same.
SPV is a commonly used vehicle, usually set up in the form of a subsidiary company with a legal status by large corporations who want to finance a large project without putting the entire firm at tremendous risk. It makes transactions more tax efficient and diffuses risk from the parent company. For Reliance Industries, this move is a deviation from its known tactics of operation when it comes to a big project. Nevertheless, the effort to structure its new line of business – shale gas – in a new way may prove beneficial after all.
RIL ventured into shale gas sector last year when it acquired assets in US based companies, namely Pioneer Natural Resources, Atlas Energy and Carrizo Oil & Gas, via respective joint ventures with each of these firms. Shale gas is being considered as an increasingly important source of natural gas in the United States and in many other countries across the world, and is speculated to have a potential to bring down the ever increasing oil and energy prices. Considering shale gas to be the next big thing in the energy quarters, RIL has invested about $ 3 billion in the project and is on the lookout for more opportunities in the same sector.
At the AGM to be help in the coming week, shareholders and investors will keenly await the details of this venture, which is likely to take centre stage in the discussions to follow.