Reliance Industries (RIL) and BP's $7.2-billion deal has received the government's stamp. Under the agreement, BP will pick up 30 per cent stake in 21 (of 23) oil and gas blocks RIL operates in India.
On July 22, the Cabinet Committee on Economic Affairs had cleared the stake sale by RIL to BP.
"RIL has received the government's approval for its transformational deal with BP. This will result in the largest foreign investment in the domestic hydrocarbon sector," RIL said in a statement.
The deal may go up to $20 billion in value based on future performance payments and investment and according to the production-sharing contract, BP will have to furnish a bank guarantee and performance guarantee.
While the deal gives BP a chance to enter India's exploration and production segment, it will give RIL access to BP's expertise in deep-water drilling and address the technical issues at its Krishna Godavari (KG) field's D6 block in the eastern offshore.
"Following the approval, RIL and BP will work together to conclude the deal expeditiously," the statement said.
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RIL, had this February, agreed to sell a 30 per cent stake in 21 of its 23 oil and gas blocks to BP Plc.
The Dhirubhai-1 and 3 gas fields in the KG-D6 block have seen output fall to 38.4 million cubic metres per day from 53 mscmd since last March. According to projections, the output should have risen to about 70 mscmd by now.
Following the deal, RIL's holding in the blocks will come down to 60-70 per cent. Niko hold 10 per cent in the block. In 19 of the 23 blocks, that lie off the east coast, two blocks are in Assam and Gujarat.
Also, RIL and BP will now form a 50:50 joint venture for the sourcing and marketing of gas in India and creation of infrastructure for receiving, transporting and marketing of natural gas in India.
RIL's second-biggest discovery block is NEC-25, off the Orissa coast. It holds potential gas resources of 9.5 trillion cubic feet (tcf) in the KG-D3 block. Hardy has 10 per cent stake in the block and Reliance 90 per cent. It has also made oil discoveries in a Cambay onland block.