New Delhi: The petroleum ministry is poised to give the go-ahead to the move by Reliance Industries Ltd (RIL) to offload a 30% stake in its hydrocarbon blocks to London-based BP Plc by mid-April.
If this happens, it would clear the decks for the largest foreign direct investment in India entailing an investment of $7.2 billion (Rs32,184 crore).
“A total of 23 farm-out (sale of equity) applications have been submitted to ministry of petroleum and natural gas, one each for the 23 blocks. The applications were filed in the first week of March. The clearance is expected before the second week of April,” said a person aware of the development, who did not want to be identified. The deal is expected to be completed in the next fiscal.
The deal involves sale of stakes in Mukesh Ambani-promoted RIL’s 23 oil and gas blocks, including the D6 one in the Krishna-Godavari (KG) basin.
While petroleum minister S. Jaipal Reddy told reporters on Monday that RIL has “filed application and it is under review”, a senior official in the petroleum ministry confirmed that the approvals are expected to be granted shortly.
While a BP India spokesperson in an email response said that “the applications have been submitted to the government of India and we are awaiting their clearance in due course”, an external spokesperson for RIL declined comment.
The forward movement on the deal between the two companies comes at a time when an acquisition in the hydrocarbons sector involving Vedanta Resources Plc is yet to receive regulatory approval. To be sure, the hold-up in the Vedanta deal is because Oil and Natural Gas Corp. Ltd (ONGC), which holds a stake in one of Cairn India Ltd’s blocks, is demanding resolution of an ongoing dispute over royalty payments.
Analysts believe that the two transactions are distinct— while the Vedanta-Cairn transaction is a share transaction involving change in the controlling interest over the assets, the transaction between BP and RIL involves participation at the asset level with no change in the operatorship.
The cabinet committee on economic affairs (CCEA) will decide on Vedanta’s proposed acquisition of a majority stake in Cairn India for $9.6 billion. The ministry of petroleum and natural gas has taken the issue to CCEA and any delay in the decision will make it difficult for Vedanta to meet the transaction deadline of 15 April. State-owned ONGC, Cairn India’s partner in a joint venture that runs the latter’s main oil asset in the country, has made the resolution of a royalty payment dispute a precondition for the deal’s approval. Reddy has stated that the royalty is cost recoverable, a stand held by ONGC.
Mint had reported on 7 February that BP was in talks with RIL to buy 30-45% in the D6 block. BP has an existing relationship with RIL in the D17 deep-water block in the KG basin as an operator with a 50% interest.
RIL, India’s biggest company by market value, holds a 90% stake in the KG D6 field off the eastern coast of India, hailed as the world’s largest natural gas discovery in 2002. Canadian hydrocarbon explorer Niko Resources Ltd owns the remaining 10%. RIL has 29 blocks in its portfolio.
However, the output at the offshore block has fallen to 50-52 million standard cubic metres per day (mscmd) from over 60 mscmd in mid-2010.
The oil-to-yarn and retail conglomerate, which operates KG D6, has intimated the Directorate General of Hydrocarbons that gas production from the field could slump further to around 47 mscmd in 2012-13, from 51-52 mscmd at present, “unless radical changes were implemented at the block”.