The just concluded Reliance Industries' $7.2-billion mega oil and gas deal with BP has come as a ‘breath of fresh air' for RIL, which has been struggling to maintain a stable output from its KG basin D6 field in the last few months, raising concerns over the real estimates from the find.
The deal investment estimates include exploration, production of offshore hydrocarbons and gas marketing and transportation.
Despite being asked about the trigger point for the deal, Mr. Ambani on Monday maintained that: “From the RIL point of view, BP's capabilities and competencies will help us find more hydrocarbons in the deep water blocks of India on the East Coast. It is one of the core reasons for this transaction.''
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Output projections
According to projections made by the Petroleum and Natural Gas Ministry, gas availability from the D6 block is expected to be around 59.4 million standard cubic metres a day (mscmd) in 2010-11, with peak production reaching a peak of 88.5 mscmd in 2012-13.
However, things have not gone according to the plan and gas production from the D6 block has become a big cause for worry for the Petroleum Ministry as well as RIL.
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The development has also impacted allocation of gas to various power projects and industries. The output from the offshore block has fallen to 50-52 mscmd from over 60 mscmd in the middle of 2010. At present, gas is being pumped from 18 wells in the block.
Big player
The deal has been termed ‘expensive but good' for RIL by oil industry watchers. “The RIL-BP deal, which was in the making in the last few months, has certainly come at the right time for the beleaguered RIL.
“There are lot of negatives emerging from the oil and gas blocks of the company including the D6 field.
“Nothing can be said with certainty about the output from these wells in the coming months. Surely BP is a big player in deepwater exploration and they must certainly have seen something positive to clinch the deal,'' a senior petroleum PSU official told The Hindu .
Further expansion
Furthermore, another oil industry official said RIL was finding it difficult to find an export market for the crude oil it was refining and one of the reasons could be the access to BP's marketing and distribution business with an eye on further expanding the refining domain.
“For RIL, it is a sweet deal and the company must be a relieved lot. With so much uncertainty over the oil and gas blocks it holds, the onus is on BP to prove that it did the right thing,'' the official remarked.