After tying up with Rosneft in Jan 2011, BP is acquiring a 30% stake in 23 oil and gas blocks that Reliance operates in India, including the producing KG D6 block and forming a 50:50 joint venture between the two companies for the sourcing and marketing of gas in India. The joint venture will also endeavour to accelerate the creation of infrastructure for receiving, transporting and marketing of natural gas in India. This will make the partnership India’s largest private sector holder of exploration acreage.
BP will pay Reliance an aggregate consideration of US$7.2 billion, and completion adjustments, for the interests to be acquired in the 23 blocks (~270,000 sq km). Future performance payments of up to US$1.8 billion could be paid based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to US$20 billion.
BP will pay Reliance an aggregate consideration of US$7.2 billion, and completion adjustments, for the interests to be acquired in the 23 blocks (~270,000 sq km). Future performance payments of up to US$1.8 billion could be paid based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to US$20 billion.
Reliance will continue to be the operator under the production sharing contracts, whose blocks lie in water depths ranging from 400 to over 3,000 metres. These currently produce about 1.8 bcf/d, over 30% of India’s total consumption, and over 40% of India’s total production.
BP has been working with Reliance since December 2008 on the D-17 deepwater block in the KG basin on the east coast of India. BP, with a 50% interest, operates the block and Reliance holds the remaining interest. However, Oil Secretary S Sundareshan said that the deal will require the government's approval as New Exploration and Licensing Policy blocks are involved.
ONGC says Jai ho!
Commenting on the deal former chairman of ONGC RS Sharma said, “This is positive news for the entire E&P sector for India. The deal covers the entire value chain - upstream and downstream." Referring to the Cairn-Vedanta deal that has failed to take off, Sharma said "the sentiments have been negatively impacted because of one deal...this deal shows confidence in the Indian oil sector."
What are the financing options of BP?
BP's recent deal with Rosneft did not involve any cash payment which is in line with BP's need to raise cash after the Macondo oil spill. This current Indian alliance involves upfront payment of $7.2 billion. How is BP planning to make the payment??
