A day after Reliance Industries and BP announced the country's single largest FDI deal, the Oil Ministry today said the transaction has brought in the elusive energy major to aid of the country's oil and gas hunt and will help attract foreign firms to NELP-IX bid rounds.
Oil Secretary S Sundareshan said the deal was validation of oil and gas reserves in India and the east coast in particular.
The Europe's second biggest oil company, BP, will pay $7.2 billion for a 30% stake in 23 out of 29 exploration blocks held by Reliance Industries and a performance payment of up to $1.8 billion if the tie-up leads to the development of commercial discoveries.
"The Ministry of Petroleum and Natural Gas has two roles - one of the regulator and the other being a dynamic role of promoting innovation and development," he told PTI here.
The entry to a credible deepwater exploration and production firm in India is an "extremely positive" development that will further help attract oil majors, he said expecting a good response to the 9th bid round for oil and gas acreage under the New Exploration Licensing Policy (NELP).
"If the deal goes through, subject to meeting necessary conditions and getting government approval, the deal has many positives. It is perhaps the largest single FDI in any sector," Sundareshan said.
Assignment of participating interest or farm-out of stake in blocks like the eastern offshore KG-D6 blocks is permissible under NELP, he said. All of 23 blocks Reliance is giving stake to BP had been won under NELP.
"As and when the parties apply to us we will examine on merit and come to a view as quickly as possible," he said.
The Reliance-BP deal will need government approval to consummate but the transaction is not on the same footing as the Vedanta Resources buying out Cairn India.
"Reliance Industries or any other operator can assign its participating interest to a third party subject to government approval. As and when RIL makes required application, Ministry of Petroleum and Natural Gas will examine it on merit and take a decision as expeditiously as possible," he said.
Farm-out of interest under New Exploration Licensing Policy (NELP), the regime under which Reliance won the 23 blocks, is allowed and company farming out (or in simple terms selling out) interest is required to make an application to the regulator Directorate General of Hydrocarbons (DGH).
However, the nature of the approval will be different from Vedanta Resources' $9.6 billion acquisition of Cairn India as the deal announced today is not transfer of control.
In Cairn-Vedanta deal, Cairn Energy Plc of UK is transferring control of its Indian unit to the London-listed mining group, which has no prior experience in oil and gas.
The BP-Reliance deal is similar to what Cairn India had done way back in 2004 with ONGC when it farmed-out 90% of its interest and operatorship in gas discovery block of KG-DWN-98/2, which sits next to Reliance's prolific KG-D6 fields off the Andhra coast.
Cairn-ONGC applied and DGH and oil ministry approved it.
Unlike the 2004 deal, Reliance is not transferring control or operatorship of the blocks to BP. Reliance said it will retain operatorship of all the 23 blocks, including the KG-D6.
Also, the major difference lies in the fact that Cairn has itself claimed that its deal with Vedanta is a corporate transaction and not a transfer of stake in the blocks.
The corporate transaction, it stated, did not require the permission of government but agreed reluctantly to it.
It made conditional application for approval on November 23, more than three months after the deal with Vedanta was announced. The application did not recognise the rights of partner ONGC.
With ONGC asserting its rights as well as seeking resolution to the royalty it pays on behalf of Cairn India, Oil Minister S Jaipal Reddy is referring the deal to the Cabinet for approval.