Global oil giant BP and Mukesh Ambani-led Reliance Industries Ltd will invest another Rs 40,000 crore ($6.2 billion) in their jointly owned KG D6 gas block situated off India's eastern coast, the heads of the two companies announced on Thursday after a meeting with Petroleum Minister Dharmendra Pradhan.
BP Chief Executive Bob Dudley said at a media conference here that the new investment is expected to produce 30-35 million cubic meters of gas a day, phased over 2020 to 2022.
"This is an important step forward for BP in India. Working closely together, Reliance and BP are now able to develop these major deep-water gas resources offshore India efficiently and economically," Dudley said.
In 2011, Reliance had sold a stake in 23 of its oil and gas blocks to BP for $7.2 billion. But output from the KG basin D6 block, expected to contribute up to a quarter of India's gas supply, has fallen drastically since April 2010.
This has also wreaked havoc in the country's power sector with several projects getting stranded due to shortage of gas. Bitter disputes with the government over the gas price have also left a sour note.
Reliance holds a 60 per cent stake in the gas block in the Krishna Godavari (KG) basin and BP owns 30 percent, while Canadian company Niko Resources Ltd holds the remaining share. Reliance and BP have invested around $1.6 billion to May this year in deep-water exploration and production.
The gas project is expected to reduce the country's import dependence by 10 per cent.
RIL chairman Mukesh Ambani said the two firms have also agreed on a strategic cooperation on new opportunities for conventional and unconventional fuel trading and marketing including jointly setting up petrol pumps.
Addressing a joint press conference, Ambani said RIL-BP after many years will invest Rs 40,000 crore to bring 30-35 mmscmd of gas.
This new and historic cooperation will also explore trading of fuel and carbon emission trading, he said.
With regard to pending arbitration, Ambani said RIL will follow legal course for bringing them to conclusion.
"We don't see pending arbitration hampering our new investments, he added RIL is locked in four arbitration cases with the government.
The company is locked in arbitration against the government disallowing recovery of certain KG-D6 gas field costs as a punishment for gas output lagging targets. Another arbitration is over deferring of a natural gas price hike due to the company from April 1, 2014. The latest arbitration is against government demanding USD 1.55 billion compensation from RIL and its partners for unfairly producing ONGC's gas.
Petroleum Minister Dharmendra Pradhan during his meeting with the two company heads invited BP and Reliance Industries to invest in fuel retailing.
While RIL already has a fuel retailing license and has some 1,400 petrol pumps on the ground, BP last year got approval to set up petrol pumps in India.