BP Plc’s plan to buy stakes in 23 oil and gas blocks in India operated by Reliance Industries Ltd. for $7.2 billion may get cabinet approval next week, an oil ministry official with knowledge of the matter said.
The oil ministry has recommended that the deal go through and referred it to the cabinet because of the large investment involved, the official, who asked not to be identified, told reporters in New Delhi yesterday.
BP wants to tap demand in Asia’s second-biggest energy-consuming nation and announced the partnership with Reliance Industries on Feb. 21. BP plans to acquire a 30 percent stake in each of the Reliance blocks, including KG-D6 off India’s east coast, the nation’s biggest gas deposit, where output has fallen because of technical difficulties at the reservoir.
“Reliance is having problems raising production from the KG-D6 field and getting BP as a partner should remedy that,” D.K. Aggarwal, chairman of SMC Wealth Management Services Ltd., said by telephone from New Delhi. “A straightforward approval helps Reliance immensely.”
Reliance rose 2.1 percent to 870.70 rupees at the close in Mumbai, the biggest gain in two weeks. The stock has dropped 18 percent this year, compared with a 7 percent decline in the benchmark Sensitive Index. BP gained 0.5 percent at 11:39 a.m. in London trading.
Reliance, controlled by billionaire Chairman Mukesh Ambani, is seeking BP’s technology and expertise to increase output from the field, which has dropped to about 50 million cubic meters a day from a peak rate of 60 million set in June last year.
“After the government approvals for the Reliance-BP partnership, the KG-D6 reservoirs will be jointly assessed to address the technical issues in ramping up production,” Ambani told shareholders on June 3.
Mumbai-based Reliance’s net income grew at the slowest pace in six quarters in the three months ended March 31 after gas output dropped.
The deal between Reliance and BP has no “loose issues,” India’s Oil Minister S. Jaipal Reddy said Feb. 22.
Vedanta Resources Plc’s proposed takeover of Cairn India Ltd., operator of the nation’s largest onshore oil deposit, was approved by the cabinet last week with conditions, more than 10 months after the deal was announced.
BP’s proposed acquisition has been referred to the Cabinet Committee on Economic Affairs, Press Trust of India reported yesterday, citing unidentified people familiar with the matter.
The $7.2 billion will be paid in the year ending March 31, Chairman Ambani said Feb. 21. Reliance has received $2 billion from BP, the Indian explorer said in an April 21 statement.
BP and Reliance will also form a venture to market gas, according to the Feb. 21 statement. Future performance payments and investments could increase the size of the deal to $20 billion, BP said that day.