Reliance mulls purchase of Value Creations

Indian conglomerate Reliance Industries is considering buying the bankrupt Canadian oil sands group Value Creations for about $2 billion, according to a report in UK newspaper the Financial Times.  The move would be the latest in a series of efforts by Reliance to branch out globally and take advantage of opportunities arising from the economic downturn. Alberta-based Value Creations, which owns Terre de Grace, one of the largest holdings of oil sands in the world, was recently placed under court protection from creditors. BA Energy, one of Value CreationsÔÇÖ subsidiaries that mothballed a $4 billion oil sands upgrader plant last year, could be forced to file bankruptcy over the next few months. This would potentially lower the valuation of the Canadian group, making it a more attractive prospect for Reliance. Located north-west of Fort McMurray, Terre de Grace is currently one of the largest wholly-owned oil sands blocks held by an independent Canadian company. The lease area consists of approximately 290 square miles (around 74,000 hectares). According to its website, Value Creations plans to use steam-assisted gravity drainage to extract up to 10,000 barrels per day of bitumen from Terre de Grace, producing about 8,400 barrels per day of upgraded product over 25 years, with production scheduled to start in 2011. The FT reported that Reliance said it was "reviewing a number of global opportunities, as the difficult operating environment of the past year has made available several interesting opportunities". In November last year, Reliance, which is controlled by Mukesh Ambani, India's richest man, made a $12 billion bidÔÇölater upped to $13.5 billionÔÇöto acquire LyondellBasell, the bankrupt international petrochemicals group. If both deals proceed, they would transform Reliance from an almost exclusively Indian operation into a global conglomerate with more than $80 billion in sales. Reliance would finance the deals through its cash balance of nearly $4 billion plus $8 billion in Treasury stock.