The $7.2-billion Reliance-BP deal may have got the Cabinet's nod on July 22, but the two companies have yet to receive formal communication of its approval from the Government.

This is a prerequisite if both firms have to complete commercial agreements, and also, separately, for Reliance Industries to continue deliberations with the Government on the status of two pending blocks for which approval has been withheld.

“We are awaiting a formal communication. BP is keen to be a long-term partner with India in its quest for energy security,” a BP India spokesperson said. Once the decision is formally communicated, the two companies will work to complete the commercial agreements, and these formalities are likely to be completed in 3-4 weeks, the sources said.

The Cabinet Committee on Economic Affairs (CCEA) allowed the British firm to acquire 30 per cent participating interest in 21 oil and gas blocks of RIL, including the premium KG-D6 gas fields. In February this year, BP had agreed to take 30 per cent stake in RIL's 23 oil and gas blocks.

For two blocks — on-land block AS-ONN-2000/1 in Assam and NEC-DWN-2002/1 in the North-East Basin — the CCEA allowed the Petroleum Ministry to take a decision pending resolution of some differences between the Directorate-General of Hydrocarbons, which is entrusted with the task of managing India's oil and natural gas resources, and the operator, RIL. The DGH and RIL have held divergent views on the exploration phase of these blocks.

Only once a formal letter is received can deliberations on the pending blocks with the DGH be initiated, persons privy to the developments told Business Line .

It took the Government almost a month to send a formal letter of approval for the other big deal in the oil and gas sector, Cairn Energy-Vedanta Resources, although the two deals are very different from each other.

Arrest output decline

RIL has already received $2 billion from BP Plc as part of the agreed $7.2 billion. For a deal this size, companies usually go in for block-wise valuation, industry observers said.

According to the deal announcement, BP will pay RIL an aggregate $7.2 billion, but future performance payments of up to $1.8 billion could also be paid if exploration success results in development of commercial discoveries. . The deal size may rise to $20 billion with future performance payments and investments, which includes a gas marketing joint venture.

By roping in BP, Reliance hopes to check falling output from its KG-D6 gas fields. RIL, which has spent over $5.5 billion in the development of the block, has not been able to contain costs. The company is currently producing 48 million metric standard cubic metres per day (mmscmd) of gas from the fields.

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