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British oil major BP is set to vastly expand its presence in India in a partnership with Reliance Industries Ltd worth up to $20 billion.
BP will take a 30 per cent stake in each of the 23 oil and gas blocks belonging to RIL for $7.2 billion, the firms announced at a press conference in London.
“BP's investment is the single largest FDI deal in India's history,” said Mr Mukesh Ambani, Chairman of RIL, adding that the deal would have a “profound impact” on India's energy future.
The partnership also includes a 50-50 joint venture for the outsourcing and marketing of gas in India and, potentially, creating infrastructure for receiving, transporting and marketing natural gas. Future performance payments of up to $1.8 billion, and other payments could raise the total value of the investment to $20 billion.
BP already has a presence in India, partnering with Reliance on the D-17 deep water block over the past three years, alongside a solar joint venture with Tata, and lubricant producer, Castrol, employing around 8,000 people in total.
The move fitted BP's strategy of allying with “strong national partners” and taking “material positions in significant hydrocarbon basins.
“There is a shift in terms of energy demand patterns and BP wants to be a part of it,” said Mr Bob Dudley, the Chief Executive of BP.
“India is about to get much more important for us.”
The blocks cover around 270,000 sq km, and produce around 30 per cent of India's total consumption of gas.
It includes Reliance's KG-D6 block, where production over the past months has been lower than expected. Reliance will continue to be the operator in the blocks, where water depths range from 400 to 3,000 metres.
Mr Ambani said BP's expertise would help generate higher rates of recovery. The transaction is subject to regulatory approval in India, but Mr Ambani said the firm expects to apply and get the approvals “quite soon”.
Stocks, GDRs rise
The Reliance Industries GDR has jumped 7.45 per cent at £44.7 against Friday's close of £41.6 at 8-45 p.m. IST.
The stock closed 2.04 per cent higher at Rs 956.5 on the Bombay Stock Exchange. Trading volumes at 10.55 lakh shares were slightly higher than two-week average volume of 9.33 lakh shares.
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