The Petroleum Ministry has recommended granting approval to the $7.2-billion Reliance Industries Ltd-BP Plc deal. However, a final call on this will be taken by the Cabinet Committee on Economic Affairs (CCEA).
“In all probability the CCEA may consider it next week. We have recommended approval of the deal,” a Petroleum Ministry official said. Asked about the reason behind the Ministry approaching the CCEA when it had all the technical capabilities of approving it on its own, the official said, “the size of the deal is big.”
This February, Reliance agreed to sell 30 per cent stake in 23 oil and gas blocks won under licensing rounds, including the D6 gas fields, in part to benefit from BP's deepwater exploration expertise. The deal has been awaiting Government approval since. Reliance will retain operatorship of all 23 blocks.
Automatic route
At present, 100 per cent foreign direct investment (FDI) is permitted in the oil and gas exploration and production sector under the automatic route. This allows companies to invest without going through the Foreign Investment Promotion Board or the CCEA.
When asked whether any concerns were raised by the Home Ministry, which has to give security clearance for the deal, the official said, “The Ministry has given its final clearance.”
Hoping to boost output
By roping in BP, Reliance hopes to check the fall in output from its D6 gas fields. RIL, which has spent over $5.5 billion in the development of the block, has been unable to contain the drop in output caused because of decline in reservoir pressure and ingress of water.
The operator had to drill more wells to raise the output to 61-62 mscmd by April 1, 2011 and 80 mscmd by April 1, 2012, as outlined in the field development plant.
Reliance had in 2006 committed to investing $8.836 billion in Dhirubhai-1 and 3 fields. The company is currently producing 48 mscmd from two fields — Dhirubhai-1 and Dhirubhai-3 (40 mscmd), and MA1 (8 mscmd).