New Delhi: Petroleum ministry has sought security clearance from home ministry for allowing UK’s BP Plc to buy 30% stake in most of the Reliance Industries’ (RIL) oil and gas blocks, including the giant KG-D6 off east coast.
Upstream regulator Directorate General of Hydrocarbons (DGH) has processed application made by Reliance for transfer of its 30% interest in 23 oil and gas blocks and sent its recommendation to the oil ministry, an official said.
“DGH had sought some clarifications on the $7.2 billion deal which Reliance has already provided. Now, the petroleum ministry has approached home ministry for a no-objection,” he said.
The Europe’s second biggest oil company will pay $7.2 billion for 30% stake in 23 out of 26 exploration blocks held by Reliance besides a performance payment of up to $1.8 billion if the tie-up leads to the development of commercial discoveries.
The official said the home ministry clearance is needed keeping in mind the strategic nature of the exploration and production business.
The home ministry may look into the shareholding pattern and organizational structure of BP besides doing a background check of board of directors and some of the key operational heads of the company before giving its no-objection certificate, he said.
Also, it may look how money is being routed by BP, which had in December last year sold almost all of its exploration and production assets in Pakistan to United Energy Group Limited (UEG) for $775 million.
The official said after the NOC, the oil ministry may accord an in-principal approval to the transaction, after which amendments to the Production Sharing Contracts (PSCs) of the 23 blocks would be done by inducting BP as a partner.
Reliance will retain operatorship of all the 23 blocks. It is hoping BP will help it reverse the sagging output from Krishna Godavari-D6 gas fields.
Output at KG-D6 fields has fallen from 60.5 million standard cubic meters per day achieved in March last year to around 50 mmscmd currently.
The $7.2 billion Reliance-BP deal is seen as the biggest FDI into India. Other proposed big transaction -- Posco’s 12 billion investment announced years ago for a steel plant in Orissa -- is yet to take off.
Reliance is the operator (with a majority stake) in all the 23 blocks while Canadian Niko Resources and UK’s Hardy Oil have minority 10% interest in a few. After the deal, Reliance’ holding in the blocks will come down to 60-70%. As many as 19 out of 23 blocks lie off the east coast while two blocks are onland in Assam and Gujarat.