Photographer: Simon Dawson/Bloomberg

BP, Reliance Close In on India Gas Field Near Missile Site

Updated on
  • Partners preparing development plans for NEC-25: Regulator DGH
  • Reliance awarded NEC-25 block in 2000 through NELP auction

Billionaire Mukesh Ambani’s Reliance Industries Ltd. and its partner BP Plc are reviving investment plans for a gas block close to a military missile launching facility in the Bay of Bengal.

Reliance and its British partner are preparing a new development plan for the gas-rich NEC-OSN-97/2 block, also called NEC-25, in the Mahanadi basin offshore eastern India, according to Atanu Chakraborty, head of India’s oil regulator Directorate General of Hydrocarbons. Work in the block was hindered partly by objections from the defense ministry for its proximity to the Chandipur missile test base.

“They are already in discussion with us on the technical aspects of their field development plan,” Chakraborty said in an interview in London. “Reservoirs are being assessed, so that they make the final decision.”

The new proposal follows an earlier integrated field development plan submitted in March 2013. Prime Minister Narendra Modi’s government has announced a slew of reforms, including the freedom to price and market natural gas, to push production from stalled projects as it aims to increase the fuel’s share in India’s energy mix to 15 percent by 2020 from 6.5 percent. Oil Minister Dharmendra Pradhan expects investments of $20 billion by as early as 2021 to raise India’s gas output.

Reliance and BP recently resuscitated their partnership by announcing fresh investments of $6 billion in gas projects in the Krishna-Godavari Basin, which lies south of NEC-25. Indian’s biggest explorer Oil & Natural Gas Corp. also plans to spend $10 billion in deepwater projects off eastern India.

Reliance shares rose as much as 0.7 percent to 823.60 rupees before paring gains to trade at 819 rupees as of 2:52 p.m. in Mumbai on Friday. BP shares were trading 0.3 percent lower at 448.55 pence in London.

These investments are expected to boost India’s gas production by more than two thirds over the next five years, according to Chakraborty.

“We will add 50-55 million cubic meters per day of gas production on a very conservative basis,” he said. The country’s current output is about 80 million cubic meters a day.

Reliance and its Canadian partner Niko Resources Ltd. were awarded the NEC-25 block in 2000 and made eight gas discoveries before BP picked up a 30 percent stake in the block through a $7.2-billion deal with Reliance in 2011. That transaction included similar interests in 22 other blocks. Niko decided to exit in 2015.

Reliance didn’t respond to an email seeking comment, while a BP India spokeswoman said the company intends to progress with the field development plan within the stipulated time frame.

“When you make a first move into a basin, it normally takes time,” Chakraborty said. “The issues related to closeness to Chandipur missile area had to be adjusted and now the Mahanadi basin fields are maturing slowly towards development. We will see investments coming there sooner than later.”

— With assistance by Saket Sundria

(Updates with share price in sixth paragraph.)
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