The Cabinet Committee on Economic Affairs (CCEA) on 22 July 2011 approved BP’s purchase of 30% stake in 21 out of 23 oil blocks belonging to Reliance Industries in the Krishna Godavari basin for $7.2 billion.
While stake sale in KG-D6 gas and discovery area NEC-25 was approved, nod for inconsequential two blocks, one a deep sea area off the Orissa coast and other an on-land block in Assam can be given by the ministry after technical issues like exploration status were sorted out.
This acquisition of 30% stake in 21 oil blocks is part of BP's strategy of creating long-term value through alliances with strong national partners, taking material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets.
The deal will give Reliance access to BP's expertise in deep-water drilling and accelerate development and production at its fields, particularly the under-performing eastern offshore KG-D6. BP on the other hand will gain entry into the oil market where energy demand is growing at 5-8 per cent.
Reliance is the operator in all the 23 blocks while Canadian Niko Resources and U.K.'s Hardy Oil have minority 10 per cent interest in a few. After the deal, Reliance's holding in the blocks will come down to 60-70 per cent.
RIL had in February 2011 signed an agreement with BP to sell the 30% stake in 23 out of its 29 oil and gas blocks for $7.2 billion. BP made a provision of pumping in additional $1.8 billion if the two explorers find more hydrocarbons. The deal is expected to help RIL ramp up its natural gas production from the KGD6 block.
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