Reliance Industries (RIL) and British energy major BP on Thursday annnouced the creation of a joint venture energy vertical to work across the entire value chain, involving investment of $6 billion, or Rs 40,000 crore.
This would also develop their existing deep water gas fields in India's eastern offshore to bring to fresh production 1 billion cubic feet per day of natural gas by 2022.
"We will invest Rs 40,000 crore over many years as new investment to bring in 30-35 million cubic metres of gas in next three-to-five years and sustain it over seven-to-eight years," Reliance Industries Chairman Mukesh Ambani said at a press briefing here.
The "solid relationship between our two companies is a great example of what can be achieved while working together at scale", he added. Ambani said RIL was investing together with its eastern offshore KG basin gas fields' consortium partner BP after a gap of 6 years.
The first project of the tie-up is to develop already discovered R-series gas fields in Block KGD6, approximately 70 km off India's east coast. A dry gas development project in water-depths of more than 2,000 metres, the project is expected to produce up to 12 million cubic metres of gas a day after going on-stream in 2020.
"India holds great promise for future," BP CEO Bob Dudley said, adding that tie-up was an important step for BP in India.
"Reliance and BP are now able to develop these major deep water gas resources offshore India efficiently and economically. It is testament to our commitment to working in partnership with Reliance and with the government to produce more energy in India, for India," he said.
BP plans to submit development plans for the next two projects for government approval before the end of 2017. Development of the three projects is expected to bring a total 30-35 million cubic metres of gas a day onstream, phased over 2020-2022.
India consumes over 5 billion cubic feet (141.5 million cubic metres) a day of natural gas. Earlier, Dudley met Prime Minister Narendra Modi.
Apart from the three projects, the two companies have also agreed for strategic cooperation, under which they will jointly explore options to develop differentiated fuels, mobility and advanced low carbon energy businesses in India, Ambani said.
BP had entered into a partnership with RIL in 2011 with a 30 per cent stake in multiple oil and gas blocks operated by RIL in India, including KGD6. Since then, the two companies have invested over Rs 10,000 crore ($1.6 billion) in deepwater exploration and production up to May 2017, according to information given by RIL.
Queried multiple times about their ongoing arbitration disputes with the Indian government, the consortium said that it were the change in policies made by the current NDA government that had guided this investment decision designed to meet the energy needs of the Indian consumer, which effort would then be upscaled at a global level.
"We still have some pending arbitrations and we hope to follow this legal process to conclude these within the framework of the law," Ambani said, referring to the arbitrations cases on shortfall in KG-D6 targeted gas output and on alleged seepage of gas from contiguous fields of state-run ONGC.
"We're pretty sure of a fair outcome of these proceedings, and which will not come in the way of future investments. Because you have arbitration, you don't stop all businesses," he added.
Dudley pointed out that a lot of such arbitration issues crop up around the world, which are then resolved. He said the change in government policies over the last few years had chiefly guided this major investment decision and also expressed satisfaction over the pricing policy for domestic natural gas for producing from difficult deep sea areas.