Companies

Reliance will need Govt approvals

New Delhi | Updated on February 23, 2011 Published on February 22, 2011

Reliance Industries will require Government approval to bequeath 30 per cent stake to British firm BP in the 23 oil and gas blocks it has in India. To make the partnership effective, Reliance would require approvals based on production sharing contracts (PSC) signed with the Government for undertaking hydrocarbons exploration and production activities.

The Petroleum Secretary, Mr S Sundareshan, told Business Line that “according to the 23 production sharing contracts, provisions exist to transfer stakes subject to Government approval. In this case also they would require the approvals.”

For each PSC, Reliance will need to make a separate application. The 23 blocks include the gas producing D6 asset. These blocks have been awarded under different rounds of NELP and according to the PSC the awardee company or consortium can assign participating interest of minimum 10 per cent in the block.

Parallels cannot be drawn with Cairn deal

Industry watchers, however, point out that drawing parallels with the Cairn-Vedanta deal on the issue of Government approval is not correct, as Reliance is farming out stake in its exploration blocks and not transferring control. In the case of the Cairn-Vedanta deal, Cairn Energy is selling majority stake in Cairn India to Vedanta Resources.

Farming out stake in exploration blocks is a global phenomenon, as it helps the contractors to mitigate the risk involved in the business. Reliance, which has been seeing drop in production from its D6 fields, can gain from BP's deepwater expertise.

Currently, Reliance produces around 54 mscmd of gas from D6. It holds 90 per cent stake in the block, with Niko Resources owning 10 per cent.

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Published on February 22, 2011
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