London: In the single largest FDI investment in India, BP Plc on Monday agreed to pay USD 7.2 billion for 30 per cent stake in Reliance Industries' twenty three oil and gas blocks,
including its prize find offshore KG-D6 fields.

Europe's second biggest oil company will pay USD 7.2 billion for 30 per cent stake in 23 out of 29 exploration blocks held by Reliance and a performance payment of up to USD
1.8 billion if the tie-up leads to the development of commercial discoveries.

Besides, Reliance and BP will form a 50:50 joint venture for sourcing and marketing of gas, including import of LNG into India, the companies said in identical statements on Monday.

They said these payments and the combined future investments in the 23 blocks could amount to USD 20 billion in total.

"This is the single largest FDI in the history of India," Reliance Chairman and Managing Director Mukesh Ambani told reporters here hoping that the world's "best finder of hydrocarbon in deepwater" will help his firm reverse the sagging output from Krishna Godavari-D6 gas fields.

Reliance has seen output at KG-D6 fields fall from over 60 million standard cubic meters per day achieved in mid-2010 to around 51 mmscmd.

Oil Secretary S Sundareshan in New Delhi said the farm-out of stake in the blocks awarded under New Exploration Licensing Policy (NELP) will need the government approval.

Different from Cairn-Vedanta deal

However, the nature of the approval will be different from Vedanta Resources' USD 9.6 billion acquisition of Cairn India as the Reliance-BP deal is a farm-out agreement and not
a transfer of control.

In Cairn-Vedanta deal, Cairn Energy Plc of UK is transferring control of its Indian unit to the London-listed mining group, which has no prior experience in oil and gas.

Reliance will retain operatorship of all the 23 blocks.

Ambani said the deal was "of course, subject to necessary government approval".

BP CEO Bob Dudley said his firm was paying equivalent of USD 7.50 per barrel. The price paid, he said, was "sensible". The UK company expects energy consumption in India to grow
by more than 4 per cent, with demand for gas rising more than 5 per cent.

Reliance-BP joint venture will also endeavour to accelerate the creation of infrastructure for receiving, transporting and marketing of natural gas in India.

The 23 oil and gas blocks together cover approximately 2,70,000 square kilometres.

Reliance treasures

Reliance has more than 25 blocks in the East coast – in the Mahanadi basin, the Krishna-Godavari basin and the Cauvery-Palar basin.

In KG-D6 block, Reliance has so far made 27 oil and gas discoveries, of which it has put two gas discoveries - Dhirubhai-1 and 3, and one oil find - MA - into production.

It had in 2008 submitted development plan for nine satellite gas discoveries around Dhirubhai-1 and 3.

In 2009, it withdrew this and submitted an optimized development plan for prioritising four satellite gas discoveries to the Directorate General of Hydrocarbons (DGH).

An integrated development plan for all gas discoveries in the block KG-D6 is being conceptualised to maximize capital efficiency and accelerate monetisation.

 

(JPN with Agency inputs)