In what can be termed as one of the biggest foreign direct investments (FDI) in the energy sector, Reliance Industries Ltd. (RIL) on Monday announced the sale of 30 per cent stake in its 23 blocks, including the giant KG-D6 gas fields, to BP of U.K. for $7.20 billion.
According to the details of the deal signed in London on Monday by RIL Chairman and Managing Director Mukesh Ambani and BP CEO Bob Dudley, BP will pay RIL an aggregate consideration of $7.20 billion, and completion adjustments, for the interests to be acquired in the 23 production sharing contracts. Future performance payments of up to $1.80 billion could be paid based on exploration success that results in development of commercial discoveries.
These payments and combined investment could amount to $20 billion, one of the largest FDIs in the country.
Besides the stake transfer, RIL and BP will form a 50:50-joint venture for sourcing and marketing of gas, according to identical statements issued by both companies.
Petroleum Secretary S. Sundareshan said the farm-out of stake in the blocks awarded under the New Exploration Licensing Policy (NELP) would need government approval. However, the nature of the approval would be different from the Cairn-Vedanta Resources' $9.60-billion deal as the RIL-BP deal was a farm-out agreement and not a transfer of control.
At present, RIL has a portfolio of 29 exploration blocks besides the 30 per cent interest it holds in the Panna/Mukta and Tapti oil and gas fields off the West Coast.
Of the 29 exploration blocks it has, RIL is farming-out 30 per cent interest in 23 of them including the producing KG-D6 block, which is estimated to hold an in-place reserve of 40 trillion cubic feet (tcf).
RIL will retain the operatorship of all the 23 blocks. It now produces about 50-52 million standard cubic metres a day of natural gas from its mainstay KG-D6 fields off the Andhra coast. Niko Resources of Canada has 10 per cent interest in the block and after the BP deal, Reliance's stake would fall to 60 per cent. Besides KG-D6, Reliance's second biggest discovery block is NEC-25 in the Mahanadi basin off the Orissa coast.
It has so far made 15 exploratory successes in the block, where Niko holds 10 per cent stake. Post-BP deal, RIL stake in this block too will fall to 60 per cent.
RIL has potential resource of 9.5 tcf in the KG-D3 block with Hardy Oil. Hardy has 10 per cent interest and RIL 90 per cent. Besides, it has made oil discoveries in Cambay on-land block.
“Completion of the transactions is subject to Indian regulatory approvals and other customary conditions,'' the statements said.
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 about 2.70 lakh sq. km.
Mr. Ambani in a statement said: “This partnership combines the skills of both companies and will be focussed on finding more hydrocarbons in the deep water blocks of India and significantly contribute to India's energy security.''
“This partnership meets BP's strategy of forming alliances with strong national partners, taking material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets,'' Carl-Henric Svanberg, Chairman of BP, said in a similar statement.
Reliance has more than 25 blocks in the East Coast — in the Mahanadi basin, the Krishna-Godavari basin and the Cauvery-Palar basin. In the 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.
“India is one of the fastest growing economies in the world. By allying ourselves with RIL, we will access the most prolific gas basin in India and secure a place in the fast growing Indian gas markets, creating a genuinely distinctive BP position,'' Mr. Dudley said.
PTI reports:
“This is the single largest FDI in the history of India,” Reliance Chairman and Managing Director Mukesh Ambani told reporters here hoping the world's “best finder of hydrocarbon in deepwater” would help his firm reverse the sagging output from KG-D6 gas fields.
Mr. Ambani said the deal was “of course, subject to necessary government approval''.
“All blocks (in the deal) are under NELP which has a well laid down framework for government approval. We will apply and get approval,” he said, adding that the transaction was expected to close in the next financial year.
Mr. Dudley said his firm was paying equivalent of $7.50 a barrel. The price paid, he said, was “sensible“.
