UK-based BP PLC has finally announced its long-delayed efforts to develop natural gas offshore India in a $6 billion investment with India’s Reliance Industries Limited. The announcement was made by RIL chairman and managing director Mukesh Ambani and BP’s group chief executive officer Bob Dudley at a press conference in New Delhi, after they met Prime Minister Narendra Modi and oil minister Dharmendra Pradhan earlier in the day.
The Rs.40,000 crore (approx. $6 billion) investment, to be made by Reliance Industries and BP Plc, is aimed at boosting output from KG Basin by as much as five times
In the first of three projects planned to be developed with the funds, the companies are expecting to produce 425 million cubic feet of gas a day from deep water gas fields roughly 70 kilometres off India’s east coast by 2020. Between 2020 and 2022 they’re expecting to add another 1 billion cubic feet a day of new gas production, assuming the other two projects are approved by the government.
RIL and BP are partners in the KG-D6 block which currently produces around 7 million standard cubic metres of gas per day. While RIL holds a 60% stake in the gas block, BP owns 30%. Canada-based Niko Resources Ltd owns the rest.
BP first partnered with RIL in 2011, spending $7.2 billion for a 30% stake in oil and gas fields operated by the Indian company. The deal was BP’s first major investment since its fatal blowout in the Gulf of Mexico in 2010, and came at a time when BP was desperately selling assets elsewhere to help pay for the fallout from the spill.
It was meant to mark a step toward new growth prospects in a market where demand for oil and gas was growing rapidly, but for years government caps on gas prices limited profitability and stymied investment.
“It’s taken a while to develop a natural gas price to help develop these projects,” BP Chief Executive Bob Dudley told at a conference in Houston in March. “It is behind in developing these resources.”
But recent reforms to encourage development of India’s natural resources, have helped to remove uncertainty over the gas price energy companies can hope to achieve for new production.
Now, the British oil giant seems ready to take advantage of India’s rapidly growing market. India already consumes over 5 billion cubic feet of natural gas a day, according to BP. It hopes to double that number by 2022.
Though weak oil and gas prices have thwarted investments and spending across the industry and delayed new projects, BP has made it clear that it is back in growth mode after years of retrenchment. In addition to its latest investment in India, BP intends to add 800,000 barrels a day of new production by the end of the decade and has ambitious plans to increase profit from its refining and marketing arm.
In addition to their plans to boost gas production, BP and RIL also said Thursday they would look for other opportunities in India in conventional fuel retail as well as solar power projects.