Reliance Natural Resources

My dear fellow Shareowners,
 
 The last financial year was one of the toughest years for doing
 business anywhere in the world, including India. The global financial
 crisis took a heavy toll on business confidence, shrunk order books and
 caused a severe credit crunch. Despite the strong headwinds, Reliance
 Natural Resources turned in another year of outstanding performance, a
 year in which we moved closer to our goal of being a complete fuel
 management services company
 
 We are now poised at the threshold of an immense growth opportunity,
 traversing the full spectrum of the energy resources value chain, from
 exploration and extraction to production and processing to
 transportation and distribution of coal, gas and liquid fuels.
 
 Performance review
 
 It gives me great pleasure to share with you the highlights of our
 Companys performance during the year 2008-09
 
 Total income of Rs 471 crore as against Rs 367 crore in the previous
 financial year
 
 Net profit of Rs 70 crore, against Rs 68.5 crore in the previous
 financial year
 
 Net worth of Rs 1,800 crore
 
 Business Review
 
 Our Company is engaged in the exploration, development and production
 of oil and gas and the sourcing and supply of gas and coal.
 
 Exploration & Production
 
 RNRL is the second largest Coal Bed Methane (CBM) player in the country
 in terms of acreage, having won four CBM Blocks in the CBM III Round.
 We have obtained the Petroleum Exploration License (PEL) for three of
 these four blocks [BS 4&5 and SP(N)]. The exploratory surveys and
 studies have been completed for all the blocks and the drilling work is
 expected to commence in the first quarter of 2009-10
 
 We have also received the PEL for the Oil and Gas Block in Mizoram,
 which we won in the NELP VI Round Our Company-led consortium has
 completed all the pre-seismic surveys and studies as per the committed
 work programme. The Aero-Magnetic survey is expected to be completed in
 first quarter of 2009- 10, which will be followed by the 2D Seismic
 Survey
 
 Natural Gas
 
 Reliance Fuel Resources Limited (RFRL), a wholly owned subsidiary of
 the Company, submitted an application to the Ministry of Petroleum and
 Natural Gas (MoP&NG) for the grant of authorization to lay a gas
 pipeline from Kakinada to Dadri for supply of gas from the large finds
 in the KG Basin in Andhra Pradesh to north India. RFRL has been
 actively pursuing the matter with both the MoP&NG and the Petroleum and
 Natural Gas Regulatory Board for expediting the grant of authorisation.
 
 RFRL has also submitted applications to MoP&NG for grant of
 authorization to start city gas distribution businesses in Mumbai,
 Delhi and the National Capital Region. We are actively pursuing the
 matter with the Ministry and the regulatory board so that we can get an
 early sanction.
 
 At a time when the management control of the Company was with Reliance
 Industries Limited (RIL) RIL has entered into a Gas Supply Master
 Agreement (GSMA) with the Company. The Company filed an application
 before the Bombay High Court questioning the appropriateness of the
 GSMA and seeking implementation of the Scheme. The Bombay High Court,
 by an interim order restrained RIL from creating any third party
 interests with regard to gas from the KG-basin. The application filed
 by the Company was disposed of by the Bombay High Court vide judgement
 dated October 15, 2007 holding, inter alia, that the said GSMA was in
 breach of the Scheme and directing RIL and the Company to negotiate and
 enter into a suitable gas supply agreement afresh within four months.
 Whilst the negotiation process was on, RIL filed an appeal against the
 said judgement before the Division Bench of the Bombay High Court and
 the Company had to follow suit. The Bombay High Court allowed the
 Government of India to intervene merely for the purpose of assisting
 the Court in interpretation of the relevant provisions of the
 Production Sharing Contract. The Government of India initially filed
 certain affidavit but subsequently sought Courts permission to
 withdraw all the affidavit filed by them and the Court accordingly
 granted permission. The hearing of the appeals concluded on January 30,
 2009 and the High Court reserved the judgement. On January 30 2009
 itself keeping in view the representations made by RIL, the Bombay High
 Court modified the earlier nterim orders allowing RIL to enter into
 agreements for sale of gas without prejudice to the rights of the
 Company and NTPC. The aforesaid interim order is operated till the
 final judgement in the appeals is pronounced.
 
 Coal
 
 The Company has pursued significant opportunities in mining, sourcing
 and supply of coal. The highlights of 2008- 09 include:
 
 A freight contract for the transportation of coal from Korba to Dahanu
 Thermal Power Station
 
 Supply of around 5 lakh metric tonnes of imported coal to Dahanu
 Thermal Power Station.
 
 Corporate governance
 
 Our Company is a proud member of the Reliance Anil Dhirubhai Ambani
 Group. As such, we have adopted the Groups charter of Corporate
 Governance Practices and Code of Conduct. These guidelines prescribe a
 set of systems, processes and principles that conform to the best
 global standards, and are aimed at promoting the interests of all our
 stakeholders.
 
 The challenges ahead
 
 The availability of quality and reliable power at competitive prices is
 the cornerstone of any modern economy and the driving force of industry
 and commerce. India is on the threshold of achieving a quantum jump in
 oil and gas production in the light of the major discoveries made
 recently. In addition, given the Governments thrust on the development
 of gas pipeline transmission and distribution infrastructure in the
 country, Indias energy sector and, more specifically, the gas segment,
 is poised to hit a new growth trajectory in the coming years.
 Similarly, coal-based Ultra Mega Power Projects would help power and
 coal sectors register a quantum jump. We are set to exploit the growth
 opportunities offered by these developments in the country leveraging
 the sound fundamentals of the Reliance ADA Group and the extensive
 manpower expertise available within the group.
 
 Our commitment
 
 Our founder, the legendary Dhirubhai H Ambani, gave us a mantra for
 growth and success: think big and act bigger.  We will follow his lead
 and his inspiration in striving for bigger and better in everything
 that we do, paving the way for ever faster growth and ever higher value
 for all our stakeholders.
 
 Anil D Ambani
 Chairman
 
 April 23, 2009