Wednesday, August 31, 2011

RIL completes $7.2 bn deal with BP

Reliance Industries (RIL) today announced completion of its 30% stake sale in 21 oil and gas blocks, including the showcase KG-D6 block , to British energy giant BP Plc for over USD 7 billion.

Industrialist Mukesh Ambani-led Reliance Industries said in a statement that the completion of the deal has paved the way for commencement of its strategic alliance in India with BP.

"This significant step will commence the planned alliance which will operate across the gas value chain in India, from exploration and production to distribution and marketing.

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"The completion of the deal delivers one of the largest ever foreign direct investments into India," RIL said.

RIL will get USD 7.2 billion for the stake sale in 21 blocks and could get further USD 1.2 billion as performance payments based on exploration success resulting into development of commercial deliveries.

Commenting on the completion of the deal, RIL Chairman and MD Mukesh Ambani said: "The alliance with BP will boost our efforts to realise the true potential of India's hydrocarbon reserves."

"The globally renowned expertise of BP and the in-depth domestic experience of Reliance make for a formidable alliance which will deliver unparalleled value for the country in its pursuit of energy security," he added.

RIL said that the two companies would also form a 50-50 joint venture for sourcing and marketing of gas in India which will also accelerate the creation of infrastructure for receiving, transporting and marketing natural gas.

BP Group CEO Bob Dudley said: "This major investment is directly aligned with our strategy of creating long-term value by forming alliances with strong national partners, gaining material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets."

RIL is India's largest private sector company with a turnover of Rs 2,58,651 crore (USD 58 billion) and net profit of Rs 20,286 crore (USD 4.5 billion) in the last fiscal ended March 31, 2011.
It had on February 21 agreed to sell 30% stake in 23 out of its 29 oil and gas blocks to BP.
Earlier this month, the company said that it has received the government approval for sale of stake in 21 blocks.

However, the approval has been held back for two blocks -- one a deep sea area off the Orissa coast and the other an onland block in Assam -- over technical issues.

Regarding the two remaining blocks, valued at about USD 2.2 million, RIL said the discussions were continuing with the government and a decision was expected "at a later date".

RIL said the 21 blocks include the KG D6 block that produces about 1.7 billion cubic feet of gas per day, which was over 40% of India's total gas output.

RIL would remain operator of the Production Sharing Contracts (PSCs) and BP will bring its global deepwater, sub-surface and gas expertise to enhance exploration and development of the blocks.

The total value of the deal could rise to as much as USD 20 billion on the basis of future performance payments and investment and would give Reliance access to BP's expertise in deepwater drilling and accelerate development and production from its fields, particularly the KG-D6 block.

RIL might also use BP's deepwater expertise to tackle the technical issues in the KG-D6 block.
RIL is the operator in all 23 blocks, while Canadian firm Niko Resources and UK's Hardy Oil have minority 10% interest in a few. After the deal, RIL's holding in the blocks will come down to 60-70%. 19 out of the 23 blocks lie off the East Coast, while two blocks are in Assam and Gujarat.
Niko has 10% interest in the KG-D6 block and after the BP deal, RIL's stake would fall to 60%.
Besides KG-D6, RIL's second biggest discovery block is NEC-25, off the Orissa coast. It has so far made 15 exploratory successes in the block, where Niko holds a 10% stake. Following the BP deal, RIL's stake in this block will fall to 60%.

Source: www.moneycontrol.com

Thanks,
Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd

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