Reliance Industries Limited has begun the new year with a blockbuster deal by selling 30% stake in 23 oil and gas production sharing contracts that it operates in India (including the KG D6 block) to British Petroleum (BP) for $7.2 billion, in one of the biggest ever inbound transactions in India.

The payout by BP could add up to another $1.8 billion based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to $20 billion, the company said on Monday.

The two are also forming a new equal equity joint venture for sourcing and marketing of gas in India. This joint venture will also seek to accelerate the creation of infrastructure for receiving, transporting and marketing of natural gas in India.

“The partnership will combine BP’s world-class deepwater exploration and development capabilities with Reliance’s project management and operations expertise,” the press statement said.

Mukesh Ambani, chairman and managing director of India’s most valued firm and the largest private sector company said: “This partnership combines the skills of both companies and will be focused on finding more hydrocarbons in the deep water blocks of India and significantly contribute to India’s energy security.”

Reliance Industries scrip closed with 2% gain on Monday ahead of the announcement of the deal that came post market hours. The stock has been an underperformer in the recent past and analysts believe it could be one of the stocks leading the show in the next uptrend in the market.

“By allying ourselves with Reliance, we will access the most prolific gas basin in India and secure a place in the fast growing Indian gas markets, creating a genuinely distinctive BP position,” said Robert Dudley, BP Group Chief Executive.

The 23 oil and gas blocks together cover approximately 270,000 square kilometres. Reliance will continue to be the operator under the production sharing contracts, whose blocks lie in water depths ranging from 400 to over 3,000 metres. These currently produce about 1.8 billion cubic feet of gas per day (bcf/d), over 30% of India’s total consumption, and over 40% of India’s total production.

“This partnership meets BP’s strategy of forming alliances with strong national partners, taking material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets,” said Carl-Henric Svanberg, Chairman of BP.

This deal comes close on the heels of a large but controversial deal struck by BP in Russia where it is forming a new partnership with Rosneft for joint development of energy resources in the Arctic through a share swap transaction. BP also has a separate joint venture with another Russian energy firm TNK.

The British energy giant has been quick to pick up pieces even as it is still recovering from a large oil spill in the Gulf of Mexico that cost it billions of dollars.

However, this is not the first venture of BP and Reliance. The two have been working together since December 2008 on the D-17 deepwater block in the KG basin on the east coast of India. BP owns 50% stake and operates the block with Reliance holding the remaining stake.

Besides the KG basic BP also has other exposure in India through public listed Castrol India Limited, a market leader in the retail automotive lubricant business, including car engine oils, premium 4-stroke motorcycle oils and multi-grade diesel engine oils. Castrol India also operates in the industrial and marine lubricants markets.

BP also has a separate joint venture with Tatas under Tata BP Solar since 1989. It is a leader in the Indian solar energy market, manufacturing solar cells, solar PV modules and systems.

What could be attracting BP into India is the robust growth in the market. According to BP’s Energy Outlook 2030, energy consumption in India has grown by 190% over the past 20 years and is likely to grow by 115% over the next 20 years, a rate of over 4% per annum.

Gas is expected to be the fastest growing fossil fuel, with demand growing at a rate of nearly 5% a year between over the next 20 years. It is estimated India’s gas consumption was at 6.1 bcf/d in 2010 (comprising 4.9 bcf/d production plus 1.2 bcf/d LNG imports) and projected to grow to 12.5 bcf/d in 2025, and exceed 15 bcf/d in 2030.

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