Reliance Industries Ltd (RIL) is likely to close its $7.2 billion deal to sell stake sale in 21 oil and gas blocks to UK’s BP plc in the next 7-10 days.
With the government formally communicating its approval for sale of 30 per cent stake in the 21 blocks, the closing documents are likely to be signed before month-end, sources in know of the development said.
BP, which had in the June quarter paid first instalment of $2 billion, will make payments of the next tranches at the close of the deal. The complete $7.2 billion amount was originally envisaged to be paid in three instalments.
Sources said 25-30 experts from BP will arrive next month to begin jointly working with RIL on its assets particularly the showpiece eastern offshore KG-D6 block, where production has fallen from 61 million standard cubic metres per day to about 46 mmscmd instead of rising to the planned nearly 70 mmscmd.
While RIL will continue its role as an operator of the blocks, BP will focus on enhancing subsurface understanding.
An overarching technical committee will set up that will ensure the blocks are explored in the right way and developed to the highest standards, they said.
Although the Cabinet Committee on Economic Affairs had on July 22 cleared the sale of stake by RIL to BP in 21 blocks, including producing block KG-D6 and discovery area NEC-25, a formal communication was sent to RIL/BP only on August 8.
Sources said RIL has already submitted amendments to the Production Sharing Contract (PSC) that needs to be done to induct BP as 30 per cent partner, to the oil regulator DGH and the petroleum ministry. Once they are approved by them, the amended PSCs may be signed in 4-6 weeks time.
RIL may hold a big show at the signing and may invite top government functionaries, including the Prime Minister Dr Manmohan Singh to witness inking of the transformational deal.
BP will furnish a bank guarantee and performance guarantee before signing the PSC.
The deal, which might increase in value to $20 billion on the basis of future performance payments and investment, will give RIL access to BP’s expertise in deepwater drilling and accelerate development and production from its fields, particularly the under-performing KG-D6 block.
For BP, which has been struggling to recover from the disastrous Gulf of Mexico oil spill last year, the transaction is a chance to enter a market where energy demand is growing at 5-8 per cent.
The first task of the RIL-BP joint technical team would be to optimise natural gas recovery from the KG-D6 block.
Sources said the alliance will also examine importing gas to India as also accelerate development infrastructure to receive and transport gas across the country.