Chevron acquires 5 percent stake in RPL

The foreign direct investments in India got a major boost as the first transnational deal in the Indian oil industry on Wednesday kicked off between Chevron, the world’s fifth-largest oil company & Reliance Petroleum. On the eve of Reliance Petroleum’s initial public offer (IPO) launch, Chevron signed an agreement with RPL to pick up a 5% stake in Reliance Petroleum for $ 300m (around Rs 1,350 crore).

As per the agreement, Chevron also has the right to acquire another 24% on conclusion of two memoranda of understanding (MoU) signed with RPL’s parent Reliance Industries: one, to optimise crude supply and product offtake and, two, to collaborate in other areas of the energy value chain. If Chevron buys more equity, it means an investment of another Rs 7,700 crore by Chevron in RPL making it one of the largest investments from any multinational company in a single project in India. This will also be one of the largest foreign direct investment in India.

Chevron investment comes as a breather to the country’s downstream oil business which was recently rattled by UK giant BP Plc’s pull out of state-owned HPCL’s Bhatinda refinery project. Chevron’s global petroleum operations consist of exploring for, developing and producing crude oil and natural gas. The company was founded in 1879 under the name Pacific Coast Oil Co. and was later changed to ChevronTexaco Corporation. It once again changed its name to Chevron Corporation in May ’05. Chevron India Holdings, Singapore, a wholly-owned subsidiary of Chevron Corporation, is the entity that will pick up the stake. The deal is subject to approval from the regulatory authorities. "We are very pleased to have forged this relationship with Reliance, one of India's leading companies, which has excelled in the execution of world-class projects. This underscores the importance of Asia to Chevron generally, and India specifically. I look forward to working with Reliance in the development of the new refinery and jointly pursuing additional opportunities," said Chevron chairman and CEO Dave O'Reilly.

Reliance also signed two memoranda of understanding with Chevron. Through the first MoU, Chevron plans to optimise the crude supply and product offtake and marketing from RPL’s 30m-tonne refinery at Jamnagar. The two companies will jointly evaluate the application of mutually selected refinery technology. The MoU also envisages that the parties would cooperate towards setting up a technology development centre in India. The second MoU sets out the intent of both companies to collaborate in other areas in the energy value chain.

Commenting on the tie-up, Mukesh Ambani, chairman and managing director of Reliance Industries, said: “The agreement and MOUs between Chevron and Reliance will be the first step in establishing a strong partnership with one of the world’s largest and most respected companies. Chevron is a pioneer which has recognised the inherent strengths of India in the energy sector.
Reliance closed at Rs 828.55 on Wednesday on the BSE as compared to its previous close of Rs 834.90 last Monday.