MHA clears sale of 30% stake in 23 RIL oil & gas blocks to BP; stock down

The Home Ministry has given unconditional approval to Reliance Industries for the sale of a 30 per cent stake in 23 oil and gas properties, including the Mukesh Ambani-led firm's showpiece KG-D6 block, to UK's BP Plc for USD 7.2 billion.

At 1:51 pm, shares of Reliance Industries were trading at day's low, down 1.15% on the Bombay Stock Exchange, which was also the day's low. It hit a low of Rs 903 and a high of Rs 918.65 in trade so far

The Home Ministry, which was asked by the Petroleum Ministry to give security clearance to India's biggest foreign direct investment, gave its no-objection certificate (NOC) on June 1, a top oil ministry official said here today.

While giving the NOC, the Home Ministry asked if Reliance could not have offered the stake to state-owned gas utility GAIL India or any other PSU.

Reliance brought in BP to leverage Europe's second biggest firm's expertise in producing oil and gas from deepsea areas.

Reliance has been facing sub-surface technical problems at its eastern offshore KG-D6 fields, where production has fallen from 61.5 million standard cubic metres per day to about 48 mmscmd, instead of rising to the planned 69 mmscmd.

Reliance hopes BP will help fix the reservoir issues and rapidly raise output to the peak of 80 mmscmd.

The official said no Indian company -- private or public sector -- has deepsea expertise and a gas marketing company like GAIL could not have added any value to KG-D6 or other blocks of Reliance.

Oil and Natural Gas Corp, the nation's largest state explorer, is in fact struggling to put together a viable development plan for discoveries it has made in a block adjacent to KG-D6 in the Krishna-Godavari basin. ONGC itself has been seeking partners for that block and had shortlisted BP as a potential ally.

The official said the Home Ministry has also asked if oil and gas can be exported. "That is ridiculous to even think. Production Sharing Contract (PSC) bars export of oil outside India and the Supreme Court has upheld the government's absolute powers to decide users of natural gas. So while India is energy deficit, no government can even think of exporting gas."

Source: www.economictimes.com

Ravi Jhawar
Summer Intern-Technical Analyst
DENIP Consultants Pvt. Ltd.