BP, RIL complete $7.2-bn deal

Delivering one of the largest-ever foreign direct investments into India, BP has completed its acquisition of a 30 per cent stake in 21 oil and gas production-sharing contracts operated by Reliance Industries Limited, the Mukesh Ambani-controlled private-sector conglomerate announced on Tuesday.

The London-headquartered gas and oil major will pay RIL an aggregate consideration of $7.2 billion subject to completion adjustments for the interests to be acquired in the 21 production-sharing contracts. Further performance payments of up to $1.8 billion could be paid based on exploration success that results in development of commercial discoveries.

This deal will help the companies commence the planned alliance, which will operate across the gas value chain in India -- from exploration and production to distribution and marketing.

The two companies will also form a 50:50 joint venture for the sourcing and marketing of gas in India. This will also accelerate the creation of infrastructure for receiving, transporting and marketing natural gas.

Ambani said the alliance with BP would boost RIL’s efforts to realise the potential of India’s hydrocarbon reserves. “The globally renowned expertise of BP and the in-depth domestic experience of Reliance make for a formidable alliance which will deliver unparalleled value for the country in its pursuit of energy security,” he added.

BP group chief executive Bob Dudley said this major investment was directly aligned with his company’s strategy of creating long-term value by forming alliances with strong national partners, gaining material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets. “This major investment is directly aligned with our strategy of creating long-term value by forming alliances with strong national partners, gaining material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets.”

The 21 oil and gas blocks cover approximately 220,000 square kilometres and lie in water depths ranging from 400 to over 3,000 metres. They include the KG D6 block that currently produces about 1.6 billion cubic feet of gas per day (bcf/d), over 40 per cent of India’s total gas production. RIL will remain operator of the PSCs and BP will bring its global deepwater, sub-surface and gas expertise to enhance exploration and development of the blocks.When the deal was originally announced, it covered 23 blocks as against the final deal of 21 blocks announced on Tuesday. “With respect to the remaining two blocks in February’s announcement, there are ongoing discussions between RIL and the Indian Government with a decision expected at a later date,” BP said.Both companies at the time of the original announcement had labelled the deal as a transformational partnership worth $20 billion in terms of the investments the deal will bring to India’s energy sector.  The technology transfer into India in the energy sector is on e of the key factors that Reliance hopes to achieve through this deal. Ambani had said, “These guys are the best. If you want to climb Mount Everest, make sure you have the best shepra with you,” he had said.The rationale of the deal from BP’s perspective is the shift in global energy demand. Dudley said that in the coming decades, two thirds of world energy consumption will be in emerging markets like India and China. “BP being a global energy company, we need to be part of this growing opportunity,” Dudley had said.