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Friday, July 25, 2014  

Reliance, BP eye $5b investment to raise D6 gas output
NEW DELHI Reliance Industries and UK partner BP plan joint investment of more than $5 billion over the next three to five years to boost declining output at a key natural gas field off India’s east coast.

“This plan, when implemented, would entail a potential total investment in excess of $5 billion over the next three to five years,” the two companies said in a statement, referring to the KG-D6 gasfield.

The D6 block in the Krishna Godavari basin was expected to contribute up to a quarter of the gas supply for Asia’s third-largest economy and help to reduce expensive liquefied natural gas (LNG) imports.

However, output from the field has been declining, putting the company under pressure from the government and regulators to increase production, even as it has pushed the government to increase the price it can charge for gas.

The two companies now plan to invest in a series of measures to develop about 4 trillion cubic feet of discovered natural gas from the block, Reliance said in a statement.

The announcement came as British Prime Minister David Cameron was in New Delhi on the second-day of a trade-focused official visit, during which he declared that his country wants to be India’s trade “partner of choice.”

Gas from these projects “will deliver energy to millions of Indians and would significantly help India in reducing its import dependence”, said Petroleum Minister Veerappa Moily.

“The decision to join forces with Reliance Industries to invest $5 billion in the next few years into India’s gas markets reinforces how two of Britain and India’s leading companies can work together,” Cameron added.

The firms hope to “significantly contribute to India’s domestic production and help the country attain energy security”, Ambani said.

Reliance holds a 60 per cent stake in the D6 block, while BP has a 30 per cent share that it obtained in a $7.2 billion deal in 2011. The remainder is held by Canada’s Niko Resources.

By the end of 2012 fields in the D6 block had produced 2 trillion cubic feet of gas, according to Reliance, which is controlled by Mukesh Ambani. In November Reliance cut its estimate of gas reserves in the block by about two thirds to 3.4 trillion cubic feet.

BP and Reliance said that they would accelerate the pace of exploration and development as soon as approvals are received.

The companies have invested $5.5 billion in the field. A second planned investment of $3.3 billion was scrapped last year because of declining in production at some blocks in the field.

“We will bring all our expertise in deep water to explore the prolific gas basins in India,” said BP’s Bob Dudley, who was part of what Cameron called the biggest-ever British overseas trade delegation.

Agencies
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