The $7.2-billion BP-Reliance Industries (RIL) deal will need government approval. But the nature of approval will be different from that of $9.6-billion Cairn-Vedanta deal, as the BP-RIL deal does not amount to a transfer of control.
BP is acquiring 30 per cent stake in 23 oil and gas blocks, including the prolific KG-D6 block, operated by India’s largest private company. RIL has 29 exploration blocks.
The transaction, which BP and RIL said will be “subject to Indian regulatory approvals and other customary conditions”, is a farm-out arrangement.
Oil Secretary S Sundareshan said the farm-out of stake in the New Exploration Licensing Policy (Nelp) blocks will need government approval. “We will examine it on merits and take a decision,” Sundareshan said.
RIL Chairman and Managing Director Mukesh Ambani said the deal was “of course subject to necessary government approval”. “All blocks (in the deal) are under Nelp, which has a well laid down framework for government approval. We will apply and get approval,” he told reporters in London.
While Cairn Energy Plc of UK is transferring the control of its Indian unit to London-listed Vedanta Resources, which has no prior experience in oil and gas, RIL is not transferring control or operatorship of the blocks to BP. RIL said it will retain operatorship of the 23 blocks, including the KG-D6.
Cairn had claimed that its deal with Vedanta was a corporate transaction and not a transfer of stake.
The transaction, it said, did not require the permission of government, but reluctantly agreed to it. It made conditional application for approval on November 23, more than three months after the deal was announced.
Moreover, the application did not recognise the rights of partner ONGC. But ONGC’s demand to make royalty payment (on behalf of Cairn India) cost-recoverable prompted the petroleum ministry to refer the deal to the Cabinet for approval. It is not clear if this deal, too, will have to go through the Cabinet.
