RIL-BP’s Plan to Buy Stake in New Terminal of Petronet LNG Nixed

Oil min takes a stern approach towards RIL after the sharp fall in KG-D6 output

Reliance Industries (RIL) and oil major BP's plan to take a stake in a new gas import terminal of Petronet LNG has been grounded under pressure from the oil ministry, which has had a strained relationship with RIL since last year, sources close to the development said. Reliance and BP, which are partners in oil and gas blocks in India and have set up a joint venture for gas marketing and infrastructure, had been negotiating with Petronet for a stake in the upcoming LNG terminal at the Gangavaram port in Andhra Pradesh, sources said. 
"Yes, over the last three-four months, RIL and Petronet LNG were actively discussing a strategic partnership which did entail a sizeable equity investment in Petronet's upcoming LNG terminal at the Gangavaram port. Another key aspect of the partnership was Petronet LNG capitalising on BP's ability to source LNG globally. But now these talks are in a limbo as the ministry is not keen on this partnership," said an industry source. 
The oil ministry has taken a stern approach towards Reliance after the sharp fall in natural gas output from the KG-D6 field, which was once feted as a game-changing discovery that would double India's gas production. The oil ministry says output fell because the company did not drill enough wells, while Reliance blames geological uncertainty and says that drilling additional wells is akin to inserting more straws into the same can of coke. 
Industry officials say the tense relationship between the ministry and RIL is a hurdle in the latter's plan to partner Petronet for the new terminal. "The ball is now in Petronet LNG's court," an industry source said. 
"RIL has been keen to strike a long-term LNG sourcing and marketing partnership with Petronet LNG and was keen on picking up a stake in its new terminal. Now, these discussions have slowed down as the petroleum ministry has asked Petronet LNG to reconsider the partnership," said a source close to RIL. Partnership with Petronet would have helped RIL's ambitious plans for India Gas Solutions, the venture RIL and BP set up after the British firm bought stakes in RIL oil and gas blocks, including KG-D6 for $7.2 billion last year. 
Sourcing and distributing LNG is a key aspect of this partnership, especially as domestic gas production has fallen sharply due to decline in KG-D6 output. India's natural gas output is estimated at 104 mmscmd this financial year, while current demand is about 166 mmscmd, petroleum minister Jaipal Reddy told Parliament in May. 
For Petronet LNG, the Gangavaram terminal will be its first on the east coast