India on Friday cleared a $7.2 billion deal for Reliance Industries Ltd. to sell a major stake in two dozen of its oil and gas blocks to Britain's BP, Petroleum Minister Jaipal Reddy said.
"We have approved the deal between RIL and BP today," Reddy told reporters after a cabinet meeting in New Delhi.
Under the agreement, announced in February, BP will buy a 30% percent stake in 23 of Reliance's oil and gas blocks, including India's largest gas field, KG-D6, for $7.2 billion.
It also envisages a performance payment of up to $1.8 billion if the tie-up leads to the development of commercial discoveries.
The oil ministry already had given its support to the partnership, one of the largest foreign investments in India.
"Since this deal was huge, we thought it was better to get it approved by the Cabinet Committee on Economic Affairs," Reddy said. "We took a positive decision."
Reliance, controlled by billionaire Mukesh Ambani, hopes BP's deepwater drilling expertise will increase output from the KG-D6 field, which has dropped to about 50 million cubic meters a day from 60 million in June last year.
BP, meanwhile, will benefit from access to new hydrocarbon resources and markets.
Such access has become especially important given the political upheaval in the oil-rich Middle East and north Africa, and a moratorium imposed by Washington on drilling in the Gulf of Mexico in the wake of last year's massive oil spill.
Reliance is the operator in all the 23 blocks, while Canadian Niko Resources and Britain's Hardy Oil have a minority 10% interest in a few.
Nineteen of the blocks lie off India's east coast, while the others are inland in the northeastern state of Assam and the western state of Gujarat.
Reliance and BP also will form a 50-50 joint venture for the sourcing and marketing of gas in India.
In a statement, BP welcomed the news and awaited "formal communication."
"BP is keen to be a long-term partner with India in its quest for energy security," the company said. "We will now work to complete the commercial agreements with Reliance and move forward with this exciting venture."
BP already operates oil and gas blocks in India and has a huge lubricant business, in addition to a solar-power venture with the giant Tata group.
Late last month, India's government gave long-awaited clearance to the multi-billion-dollar sale of British oil explorer Cairn Energy's Indian oilfields to London-listed mining group Vedanta Resources.
That approval, nearly a year after the sale was initially announced, came with the key rider that Cairn India's new owner must share the oilfields' royalty burden, currently borne in full by India's state-owned Oil and Natural Gas Corp.
Copyright Agence France-Presse, 2011