Govt still doesn't see RIL & BP as partners: Sources

The much-hyped partnership between global oil major British Petroleum (BP) and India's largest private company Reliance Industries (RIL) has not yet gotten the stamp of approval from the Government of India, reports CNBC-TV18 quoting sources.

Fresh after getting approval for investing USD 7.2 billion in Reliance Industries' oil and gas properties, BP Plc on Wednesday pressed for an early government nod to develop satellite fields in the KG D6 block and reverse sagging natural gas output from the prolific acreage.

However, sources tell CNBC-TV18 that the government wants BP to first become a signatory to the production sharing contract (PSC). "RIL cannot yet share data on KG-D6 and other blocks," the source said adding, "…nod for BP to sign PSC is taking time despite CCEA nod on July 7."

Nayantara Rai of CNBC-TV18 reports that BP received the approval letter from Government of India on August 8, which is also the effective date for the transfer of participating interests in all the PSCs. She quoted sources at BP as saying, "PSC amendments for all 21 blocks have been signed by all the partners and duly submitted, as have all documents as required by the approval letter. The joint venture has already begun work and teams are looking at options to increase production from the KG D6 and other projects.” BP finds the PSC amendment signing merely procedural and a formality requiring certain documentation.

Reliance has attributed the fall in output to a drop in reservoir pressure and water ingress, but upstream oil regulator DGH said the company has not drilled an adequate number of wells. Sources say RIL needs BP to quickly come on board to ramp up D6 production.

However, rating agency Moody's said RIL's rating not to be impacted by gas output decline.

Meanwhile, Bob Dudley, the Chief Executive of Europe's second biggest oil company, arrived in India yesterday evening on a two day visit during which he will meet the virtual who’s-who of the government — from Prime Minister, Manmohan Singh to Finance Minister, Pranab Mukherjee and Oil Minister, S Jaipal Reddy.

Speaking to the press today, Dudley said, he expects KG-D6 gas output to rise from 2014. "I believe it will take to 2014 to get these kinds of structures developed and tied back into infrastructure. We can see the resources out there and I believe by 2014, we will be back up," he said adding, "We will apply for government approval on D-6 development plan this year."

Commenting on the gas pricing issue, Dudley said, "In general deep-water requires a lot of capital. It's a lot of risk; you never know exactly what is down there miles below the subsea and so you obviously need to develop mechanisms that create the rewards for all that risk that are in place. And overtime, free market system is what any economy needs to be able to ensure efficient development of these resources."

Though the initial focus will be on India, chairman Mukesh Ambani doesn't see BP-RIL partnership just limited to Indian shores. "We will look at appropriate opportunities between where our true synergies come together all over the world," he believed.
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