Archive for December, 2013

RIL and BP may have to give a $1.2 billion bank guarantee for high gas price

December 31, 2013

Mukesh Ambani’s Reliance Industries Limited(RIL) along with its partners, British Petroleum, the world’s fifth largest oil & gas company and Niko Resources of Canada may have to give a bank guarantee of $1.2 billion over three years to get approval from the government to double the rate of natural gas produced from the main fields at KG-D6.

On December 20th, it was announced that the Committee on Economic Affairs (CCEA) had in fact given the go-ahead to RIL to nearly double the pricing of natural gas from April 2014. The condition imposed at this point was that the company would have to give a bank guarantee to cover its liability if gas-hoarding charges are proved. This guarantee is the same as the incremental revenues that RIL stands to gain from the price increase. The reason for this guarantee is simple; if RIL is found to have hoarded gas or deliberately suppressed production at Dhirubhai-1 and 3 (D1 & D3) since 2011, the government will claim this guarantee. This bank guarantee, analysts claim will be around $4 billion. This amount will be the difference of the current and old price. This is because the price will rise from $4.2 per million British thermal unit to $8.2-8.4 million after the Rangarajan pricing formula comes into effect from next fiscal.

For the entire remaining gas reserves of about 0.75 Tcf (Trillion cubic feet) in D1 and D3, the bank guarantee comes to $3 billion. . At current rate of production of about 8 million standard cubic meters per day, D1&D3 will produce about 0.3 Tcf in the next three years – the time that may be needed to settle the issue of gas hoarding charges. Analysis estimate that the guarantee for 0.3 Tcf comes to $1.2 billion. RIL, which has a a 60% stake in KG-D6 will have to shell out $60million per quarter while BP and Niko who have a 30% and 10% stake respectively will also have to fork out some money.

Dhirubhai 1 and Dhirubhai 3, named after RIL’s Founder Chairman Dhirubhai Ambani were the first of 19 discoveries in the KG-D6 block in 2009. The offshore oil goldmine on India’s eastern coast was put into production in April 2009. The original estimation of the deposits in this basin was around 10.03 Tcf. However, this was drastically reduced to 2.9 Tcf following the production data at hand for the first three years. At this time, RIL faced nearly insurmountable hurdles with water and sand seepage rampant in these wells. As if that wasn’t enough, the wells faced a sharp drop in reservoir pressure. Industry veterans though, have universally praised RIL for the gas they’ve managed to extract in spite of these difficulties. Of the 2.9 Tcf, 2.2 Tcfhs been produced in just over four years.

Many people familiar with this particular case feel that the new rate will apply to all the other fields in the KG-D6 basin without any preconditions. Wells such as MA oil and gas as well as those fields like R-Series and satellite discoveries that come into production in 2016-17 will also get the new rates without any preconditions.



RIL’s Hazira Manufacturing Division wins Accolades

December 27, 2013

Mukesh Ambani’s Reliance Industries Limited (RIL) has once again been lauded for its accomplishments. This time, it’s the Hazira Manufacturing Division which has been presented with three Platinum Awards at the 2nd Lean Six Sigma Convention of the CBE (Concept Business Excellence Pvt. Ltd) and, the Excellence Award, the highest honour of the International Convention on Quality Control Circles 2013.

Reliance Industries Limited’s (RIL) Hazira Manufacturing Division (HMD) has won three Platinum Awards at the 2nd Lean Six Sigma Convention of the CBE (Concept Business Excellence Pvt Ltd). The event was held at the FGI (Federation of Gujarat Industries) Business Centre, Vadodara, on October 26, 2013. The HMD won the most coveted award, awarded to the best, amid fierce competition from industry stalwarts. The three HMD projects that caught the eyes of the panel of eminent judges related to elimination of HTM (CL2), reduction in chilled water consumption in the POY plant and reduction of caustic consumption in the PTA-1 plant. There were 21 finalists from various industries, including names such as Linde Engineering (I) Pvt. Ltd, Apollo Tyres, Saint Gobain Glass, Esquire Machines, Thermax Ltd, KEC International Ltd, Crompton Greaves Ltd, E-Tech Global Services, Ferromatik Milacron India and Jubilant Life Science, to name a few.

RIL’s Hazira Manufacturing Plant is locaed in the town of Hazira, near Surat, Gujarat. It comprises of a Naptha cracker feeding downstream fibre intermediates, plastics and polyester plants. Mukesh Ambani has been at the helm of this plant since its inception. RIL has been operating the plant for over 20 years; the plant was commissioned in 1991-92 to generate power/utility and to manufacture Ethylene Oxide (EO), Mono Ethylene Glycol (MEG), Vinyl Chloride Monomer(VCM), Poly Vinyl Chloride (PVC) and High Density Polyethylene (HDPE).

In addition to the three platinum awards, the manufacturing division at Hazira has also won the Excellence Award, the highest honour of the International Convention on Quality Control Circles 2013. To win this award, RIL had to beat off completion from 280 QCC teams from 12 countries. The award ceremony took place on October 25th at the Taipei Convention Centre in Taipei, Taiwan. RIL was presented with this award for ‘Improvement in throughput at Polyester Auto Warehouse’. The theme of the event was: ‘Continuing implementation of QCC activities, moving towards a brighter future of the world’. The team has earlier won the Gold Award at VCQCC-2012 in Vadodara and the Par Excellent Award at NCQC-2012 in Kanpur.

Mukesh Ambani Named as one of 25 Greatest Global Indians

December 18, 2013

Reliance Industries Limited’s (RIL) MD and CEO, MukeshAmbani was recently named as one of the 25 Greatest Living Global Indians. At a glitzy function held at RashtrapatiBhavan, India’s leading television news channel, NDTV honoured the successful businessman with the award.

RIL’s MD and CEO’s story on how he came to join Reliance Industries, a company his father founded is quite interesting. A Chemical Engineer from the prestigious University Department of Chemical Technology (UDCT), he went to the Stanford University’s Graduate School of Business soon after. He dropped out of the prestigious MBA program where is classmate was future Microsoft CEO Steve Ballmer to help his father out with his business. Since joining Reliance, MukeshAmbani has taken over the mantle of growing and developing one of India’s biggest companies.

Under his leadership, Reliance Industries has diversified into chemicals, retail, life sciences, philanthropy, education and sports. Talking at the award ceremony held in the presence of the honourable President of India ShriPranab Mukherjee, Mr. Ambani advised the youth of India to dream big and focus on goals. He added that doing this would help them to overcome obstacles and succeed in their endeavors. He also said that there was no substitute for hard work. Going down into the trenches and working your socks off is an absolute must according to the business leader. He also emphasized on the need to believe in India and her growth story. This belief in India – one of the fastest growing economies of the world along with confidence and belief would no doubt help people fulfil their ambitions and achieve success in all their ventures.

Mr. Ambani has also praised the role his family played in his and his company’s success. He has always maintained a huge load of gratitude to his parents, Dhirubhai and KokilabenAmbani and his wife Nita Ambani and their three children Anant, Akash and Isha. MukeshAmbani has also said previously that he makes it a point to spend his Sundays at home in the presence of his family and ensure that he is more than anything else a good husband and father. Thus, there’s a lot to be learned from one of India’s biggest business honchos.


Reliance Retail inks deal with Samsung for after-sales service

December 16, 2013

Reliance Retail has signed a deal with Samsung that will see the Indian chain manage after-sales service of Samsung devices. This signals a new chapter in Mukesh Ambani’s retail ventureas it looks to enter into deals with the top manufacturers of electronic, computer and mobile devices to become the country’s largest one-stop consumer electronics installation, maintenance and service venture.

The first of such kind has Samsung and Reliance’s retail division launching ‘resQ.’ This program is under a trial run in Pune. A source close to Reliance said that this new program is part of the bigger agenda that the company has in mind and will play a critical role when 4G services are launched by Reliance Jio Infocomm. “However, it will not be easy,” this person said. “It is a people-driven industry where Reliance has to constantly skill and re-skill technicians and keep them motivated,” he said. Nearly 2,000 people are already working at Reliance resQ and the company wants to raise the headcount to 10,000 in two years. According to this source, the inspiration for this might have come from Best Buy – an electronics retail giant from the US. Best Buy’s ‘Geek Squad’ is a tech support and service platform that deals with after-sales service.

Some sources say that talks are already in place between the retail arm of one of India’s largest Private Sector Companies and several giants of the electronics industry such as LG, Videocon, Godrej, etc., to provide after-sales service. The resQ unit currently provides service back-up only for products sold through the group’s electronic retailing venture, Reliance Digital. It wants to extend this to all kinds of warranty and out-of-warranty support for products purchased from other retailers as well. The resQ plan, which was launched in the last quarter, provides a comprehensive, all-inclusive comprehensive homecare plan for all electronics, home appliances and digital products in a household.

After contacting the retail company, a spokesperson said that resQ plans to offer its service expertise through various initiatives and partnerships in order to drive better value for consumers and brands. A Samsung India spokesperson, however, declined to comment.While the industry and retail space as a whole are looking forward to seeing how this system works, industry experts remain doubtful about the viability of the same. The main doubt arises from the fact that Reliance’s plan to forge alliances with company’s pan-India is highly ambitious given the huge shortage of qualified, skilled staff. Also, some people at a leading appliance maker have also expressed doubts regarding the same.

A source on the condition of anonymity said, “There is a risk attached since the service provider in this case can distort the consumer’s brand loyalty by pitching for other brand products,” indicating that their company intends to the existing network rather than work with a company handling multiple brands. Another point which could deter the whole momentum that Reliance is building is the fact that most electronic companies are investing to ensure direct contact with consumers.


RIL, Dassault may join forces to Produce Wings for the Rafale

December 11, 2013

The Indian Air Force (IAF) selected the Dassault Rafale as its new multi-role fighter after a lengthy selection process in early 2012. The competition was fierce and the French Manufacturer was delighted to have been selected as the preferred bidder. Shortly after this Rupees 60,000 crore deal was announced by the IAF, Dassault signaled that a deal with Mukesh Ambani owned Reliance Industries Limited (RIL) that would be highly beneficial as far as local manufacturing of the advanced fourth-generation fighter’s components was concerned. Now, many months after the intent, RIL and Dassault are likely to collaborate on the manufacture of the multi-role fighter’s wings.

The IAF has a deal for a total of 126 fighters with 18 of them to be brought in fly-away condition from France. However, the remaining 108 planes will be manufactured in India and this is where RIL comes in. Looking forward to high-quality local manufacturing with no compromise in quality the French and Indian industry giants are planning to set up an Rs 1,000-crore facility for producing the wings of the combat aircraft and it is most likely to come up in Bangalore. The plan is that RIL would create factories and an assembly line similar to the facility in Southern France. Also, the Ministry of Defence (MoD) paving the way for a private company in the air superiority and air combat sector is a landmark development.

Dassault originally wanted RIL to be in charge of the actual manufacturing of the aircraft in India. However, this proved to be a roadblock as the IAF tender had specified Hindustan Aeronautics Limited (HAL) as the executioner of the aircraft’s assembly in India. However, with clearance from the MoD and the IAF, RIL is keen to begin production of the advanced fourth-generation fighter’s wings.