Mukesh Ambani-led Reliance Industries (RIL ) and global energy major BP Friday incorporated their joint venture (JV) company - India Gas Solutions - which will focus on sourcing and marketing of natural gas in the country.
"The incorporation of the JV company is a significant step in the relationship of RIL and BP and further establishes the commitment of both the parties to the Indian market," P.M.S. Prasad, executive director, RIL said in a statement.
According to Prasad, the demand of natural gas has been growing at a high rate and is on the way to become the preferred fuel of the future.
"Demand for gas has been growing at an exponential rate and we anticipate natural gas to emerge as the preferred choice of fuel given its properties as a cleaner and sustainable fuel sources," Prasad said.
RIL said that the JV company will assume the administration of the existing gas contracts to KGD6 block in the Krishna Godavari (KG) basin and also pursue other opportunities including LNG (Liquefied natural gas) imports.
"India Gas Solutions Pvt. Ltd. will be funded with equal equity from BP and RIL. The company's board comprises six members with equal representation from BP and RIL," the statement said.
BP's Kris Sliger will be appointed as the new company's chairman and RIL's Bibhas Ganguly will be appointed as its vice-chairman.
The statement added that the company will commence operations with 30 employees from both the companies and will develop infrastructure to accelerate transportation and marketing of natural gas within the country.
Earlier, RIL had received the government's approval in August for a $7.2 billion deal with BP, which will see the London-based company take a 30 percent stake in 21 oil and gas blocks operated by the Mukesh Ambani-led firm.
The deal, which was originally for a 30 percent stake in 23 oil and gas blocks held by RIL was on hold pending approval from various ministries. The government gave its nod to 21 of the blocks, the remaining two were held back on some technical issues.
The deal is worth $7.2 billion and is one of the single largest foreign direct investments in the country.
At the time of signing of the deal, BP had said it could also pay the Mukesh Ambani firm another $1.8 billion, based on successful exploration and that the deal size may increase to $20 billion, depending on future performance payments.