BP and India's Reliance Industries announced on Feb. 21 a massive investment deal which could be worth up to $20 billion with later investment in key Indian oil and gas assets. BP said it will pay $7.2 billion to Mumbai-based Reliance Industries for a 30% stake in 23 Indian oil and gas blocks. And it will make performance payments of up to $1.8 billion could be paid based on exploration success that results in development of commercial discoveries.
"The partnership will combine BP's world-class deepwater exploration and development capabilities with Reliance's project management and operations expertise," the two groups added. Apart from the oil and gas blocks, BP and Reliance will also set up a 50-50 joint venture for the sourcing and marketing of gas in India.
The deal is as "one of the largest foreign direct investments into India," covering some 270,000 square kilometers.
The production sharing contracts currently produce more than 30% of Indias total gas consumption and more than 40% of its total production.
Analysts in India hailed the accord as a huge boost for Reliance and the country which has been trying to boost energy production to meet the needs of its booming economy. "This is a huge sentiment booster for Reliance and the country, demonstrating that its oil blocks have strong credibility," said Sonam Udasi, head of research with Mumbai-based IDBI Capital. The BP cash will also help Reliance build its war-chest for further expansion said Udasi.
Reliance has generated two billion dollars through the sale of shares since September 2009 and is expected to keep raising cash to boost its reserves and ability to make acquisitions. Reliance operates the worlds largest oil-processing complex in Jamnagar, western India, where two adjacent refineries have a combined capacity to process 1.24 million barrels of oil a day.
Copyright Agence France-Presse, 2011
