BP enters a strategic alliance with Indian Reliance by acquiring a 30 per cent stake in 21 oil and gas production sharing contracts (PSCs) of the Indian oil company. The cooperation of the two oil giants aims to operate across the gas value chain in India, from exploration and production to distribution and marketing.
Mumbai/India – This deal marks one of the largest ever foreign direct investments into India: among the shares acquired by BP is also the block KG D6 off the coast of Andhra, Bay of Benghal, that is already harvested, producing 40 percent of India's gas output. Both companies will also participate in a 50:50 joint venture that shall source and market natural gas on the Indian market. Only recently these plans were approved by the Indian government.
Ambani, Chairman and Managing Director, Reliance Industries, said “The alliance with BP will boost our efforts to realize the true 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.”
BP gains this entry on the Indian market by an aggregate consideration of US$7.2 billion to Reliance for the acquired interest. Further payments of up to US$1.8 buillion are based on exploration success and harvesting of gas in the commonly owned shares.
“This is the beginning of what we expect to be a long and successful working partnership with Reliance, building on the strengths of each company,” said Bob Dudley, BP group chief executive. “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, lying in water depths from 400 to over 3,000 metres. They include the KG D6 block that currently produces about 1.7 billion cubic feet of gas per day, over 40 per cent of India’s total gas production. Operation in the PSCs will be done by Reliance. BP will support its Indian partner with global deepwater, sub-surface and gas expertise to enhance exploration and development of the blocks.