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BP Plc writes off investment in RIL's KG Basin; $2 billion sunk in India, Brazil, Mexico

Despite the write off, the company has further invested $5 billion along with RIL at three blocks in KG Basin- R Series, Satellite & MJ. BP's share would come around $1.5 billion in the new investment

In 2011, BP Plc had bought 30 per cent stake in most of RIL's oil and gas blocks, including the gigantic eastern offshore KG-D6 fields In 2011, BP Plc had bought 30 per cent stake in most of RIL's oil and gas blocks, including the gigantic eastern offshore KG-D6 fields

The British oil exploration and production (E&P) giant BP Plc has written off a part of its investments in Reliance Industries' much-hyped assets in Krishna Godavari (KG) Basin. The company has not quantified the write-offs country-wise, but it comes to nearly $2 billion for India, Brazil and the Gulf of Mexico.

"Second quarter (April-June) and first half 2020 include the exploration write-off of $1,969 million ($1,670 million after tax) relating to fair value ascribed to certain licences as part of the accounting at the time of acquisition of upstream assets in Brazil, India and the Gulf of Mexico," BP Plc said in its press statement.

In 2011, BP Plc had bought 30 per cent stake in most of RIL's oil and gas blocks, including the gigantic eastern offshore KG-D6 fields. BP Plc entered into the business as an equity partner since the assets were facing huge decline in production quantity. The assets failed to meet its production targets set by the government even after BP Plc's entry. The E&P business of RIL has been making losses for the last 3-4 years.

Also read: COVID-19 fallout: BP slashes dividend after $6.7 billion loss in Q2

BP has previously written off $790 million in 2014 from its Indian investments. Despite the write off, the company has further invested $5 billion along with RIL at three blocks in KG Basin --- -R Series, Satellite & MJ. BP's share would come around $1.5 billion in the new investment.

In addition, BP has invested another $1 billion in July for 49 per cent stake in RIL's fuel retailing joint venture. The new CEO of BP Plc, Bernard Looney said during the recent earnings call, "In India last month, we launched our new Jio-BP mobility partnership with Reliance. It aims to create a fuels retail network of up to 5,500 sites over the next five years. And we'll do that in partnership with our great friend, Mukesh and the team at Reliance."

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BP Plc spokesperson said in an email reply, "Unfortunately, at the moment we don't have any more to add to what we have already released. The write offs we discussed in the June press release are across our global operations, and we have not gone into any detail yet on where those write offs will be. Similarly, we have no country specific details to add to Bernard's remarks on exploration and reducing oil and gas production."

COVID-19 pandemic has delayed production from RIL's R-series block, which was planned to start in June. The production commencement has been pushed to the second half of this fiscal. The KG D6 project (three phases) is expected to produce more than 3 trillion cubic feet of gas with gross production of 28 million metric standard cubic metres per day, and should reach peak production by FY24.

Also read: Saudi Aramco losses to derail investment in Reliance

RIL has said earlier that the production from satellite cluster and MJ are expected in 2021-22. BP Plc's impairment charges in the upstream segment were $11,100 million and $11,885 million for the second quarter and half year, respectively. Impairment charges mainly arose as a result of changes to the group's oil and gas price assumptions, the company said. It includes valuation changes in Azerbaijan, BPX Energy, Canada, Egypt, India, Mauritania & Senegal, the North Sea, and Trinidad.