BP to buy 30 percent stake in RIL oil blocks for $7.2 bn

February 21st, 2011 - 7:10 pm ICT by IANS  

New Delhi, Feb 21 (IANS) Mukesh Ambani-led Reliance Industries (RIL) Monday said that London-based global energy major BP was buying a 30-percent stake in 23 of its oil and gas blocks for a whopping $7.2 billion.The pact, which will constitute one of the largest single foreign direct investment proposals for India, was signed in London by Ambani and Robert Dudley, the chief executive of BP Group, formerly called British Petroleum.

“The partnership across the full value chain comprises BP taking a 30 percent stake in 23 oil and gas production sharing contracts that Reliance operates in India, including the KG D6 block,” the $44.6 billion Indian oil to retail giant said in a statement.

BP will pay Reliance Industries an aggregate consideration of $7.2 billion for the interests to be acquired in the 23 production sharing contracts, RIL added.

The pact also includes a 50:50 joint venture for the two companies to source and market gas in India, which will seek to “accelerate the creation of infrastructure for receiving, transporting and marketing of natural gas in India.”

The deal was announced after the closing bell for Indian stock exchanges, where the shares of Reliance Induastries had closed at Rs.956.50 with a gain of 2.04 percent or Rs.19.15 on the Bombay Stock Exchange.

London-based, India-born industrialist’s Vedanta Group had earlier proposed to acquire 51-percent stake in the Indian assets of Cairn Energy for $9.6 billion. This deal is expected to go to the cabinet for a final call.

RIL said it expects more payments from the deal in the future, based on explorations resulting in development of commercial discoveries. Together, these could amount to $20 billion, said RIL, India’s largest private company by market capitalisation.

“This partnership combines the skills of both companies and will be focused on finding more hydrocarbons blocks of India and significantly contribute to India’s energy security,” said Ambani, chairman and managing director of Reliance Industries.

The 23 oil and gas blocks together cover approximately 270,000 sq km and RIL will continue to be the operator under the production sharing contracts. These blocks currently produce about 1.8 billion cubic feet of gas per day — over 30 percent of India’s total consumption and 40 percent of production.

“India is one of the fastest growing economies in the world. By allying ourselves with Reliance, 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,” said Bob Dudley.

BP has been working with Reliance since December 2008 on the D-17 deepwater block in the Krishna Godavari (KG) basin on the east coast of India. BP, with a 50 percent interest operates the block and Reliance holds the remaining interest.

According to BP’s energy outlook 2030, energy consumption in India has grown by 190 percent over the past 20 years and is likely to grow by 115 percent over the next 20 years, a rate of over 4 percent per annum.

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