Oilmin Backs BP’s Stake Buy in RIL

Proposal, which has been cleared by MHA, may come up before CCEA next Thursday

The oil ministry has unequivocally supported BP's $7.2-billion deal to buy stakes in Reliance Industries' 23 oil and gas blocks, paving the way for approval of the landmark deal that marks the first significant investment by a global oil major in India. A top government official said the cabinet was expected to consider the deal next Thursday. The oil ministry, which recently secured cabinet approval for the Cairn-Vedanta deal and also took the bold decision of raising fuel prices, could have approved this deal itself, but chose to seek the cabinet's clearance, given the large size of the deal, the official said.

"The oil minister has recommended the approval of the $7.2-billion investment. He signed it last night and sent it this morning. In all probability, it is coming up next Thursday before the Cabinet Committee for Economic Affairs," said the official, who did not want to be identified as he is authorised to speak about it only after cabinet approves it. The proposal has been sent to the ministries of law, fin ance and home. The home ministry has cleared the proposal after some initial reservations, the official said. BP, which announced the deal last February, reacted cautiously. "The applications have been submitted to the government of India for their approval. We are awaiting their response in due course," BP spokesman Mark Salt told ET. Oil ministry officials said the referral of the Reliance-BP deal to the cabinet was significantly different from its move to seek the cabinet's nod for the Cairn-Vedanta deal. Gas Marketing JV also on Anvil The Cairn-Vedanta deal was also considered by a group of ministers (GoM). "There is no need for a GoM. In the case of Cairn-Vedanta, the cabinet was given two options. In this case only one option has been given. The ministry has taken an unequivocally positive position," the official said. He said the Cairn-Vedanta deal had revenue implications for the government and state-run Oil and Natural Gas Corp, making its approval more complicated, unlike the Reliance-BP deal. Reliance Chairman Mukesh Ambani told ET in an interview in May that BP's deep-sea expertise was expected to help the company reverse the decline in gas output from the D6 block. Reliance and BP also plan to set up a 50:50 gas marketing joint venture, which will build infrastructure and supply liquefied natural gas (LNG) to the rapidly growing domestic market. The total investment from BP, including field development and marketing infrastructure could eventually add up to $20 billion. Reliance has been facing the ire of gas consumers as well as authorities over the declining gas output. The Comptroller and Auditor General has also questioned the capital expenditure on the field. Analysts said the involvement of BP in the block would give a strong endorsement of the expenditure. BP is upbeat about the Indian 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 fastestgrowing fossil fuel, with demand growing at a rate of nearly 5% a year between 2010 and 2030.