Feb. 20 (Bloomberg) -- BP Plc and Reliance Industries Ltd., partners in India’s biggest natural gas deposit, plan to spend more than $5 billion developing the area off the nation’s east coast to restore flagging output.
The investment will be made over the next three to five years to exploit the 4 trillion cubic feet of discovered reserves, the explorers said in a joint statement yesterday. Reliance Chairman Mukesh Ambani and BP Chief Executive Officer Bob Dudley met India’s Oil Minister Veerappa Moily in New Delhi to share the plan, according to the statement.
Production from the KG-D6 block in the Bay of Bengal has been falling for more than two years, leading to declining profit at Mumbai-based Reliance in four of the last five quarters. London-based BP is seeking to raise gas output and supplies to factories and homes in India after spending more than $7.2 billion in 2011 to buy stakes in Reliance’s fields.
“Gas from these projects will deliver energy to millions of Indians and would significantly help India in reducing import dependence,” Moily said in the statement. “We will do the needful to fast-track these projects and help them attain economic viability.”
Dudley is part of the delegation accompanying U.K. Prime Minister David Cameron on his visit to India that started in Mumbai on Feb. 18.
Gas from KG-D6 fell 37 percent to 275 billion cubic feet in the nine months ended Dec. 31 from a year earlier because of reservoir complexity and a natural decline in output, Reliance said Jan. 18. The company in December began drilling its first well in the KG-D6 block in more than a year. The newer fields, called R-Series and Satellites, are located within the KG-D6 block and will add to production from 2017, according to the statement.
The BP-Reliance partnership is “focused on finding more hydrocarbons and addressing the complexities of the geology along the east coast of India,” Ambani said in the statement.
Reliance’s plans to raise production may get a boost if the government accepts the recommendations of a panel led by Chakravarthy Rangarajan, chief of the prime minister’s Economic Advisory Council. The panel wants gas rates in India to be benchmarked to global rates, which will raise prices to about $8 per million British thermal units.
Reliance currently sells the fuel from the KG-D6 block for $4.2 per million Btu, a price which comes up for revision in April 2014.
The explorer, which also operates the world’s biggest oil refining complex in western India, sold stakes in KG-D6 and 20 other blocks to BP as Ambani sought BP’s technology to drill and produce gas from the deepwater area.
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