Reliance Industries and London-headquartered BP on Monday committed to step up gas production from the Krishna Godavari basin by 2014 and indicated a liberal pricing regime would be desirable for development of oil and gas fields and for a robust gas market in the country.
RIL chairman Mukesh Ambani, who met petroleum minister S Jaipal Reddy and commerce minister Anand Sharma along with BP Group chief executive Bob Dudley told reporters the partnership between the companies is not limited to opportunities in India alone.
Reliance, which announced the sale of 30% stake in 23 oil and gas blocks to BP this February for $7.2 billion with the provision for getting another $1.8 billion linked to future exploration success, hopes to step up gas output from the D6 block banking on BP?s deep water exploration skills.
The fall in gas output from the field from 61 million standard cubic metres a day (mmscmd) in March last year to about 40 mmscmd now has invited criticism from the upstream regulator and pressure from government to fix it.
BP is of the view that drilling more wells indiscriminately will not solve the problem due to the geological characteristics of the Reliance-operated D6 block. BP is now working with the Indian government to get approval for starting work on some additional satellite reservoirs and is hopeful of getting it this year so that engineering work could begin immediately to raise gas production again, Dudley told reporters after his meeting with Anand Sharma.
?I believe by 2014, the gas production will go up,? he said.
He said that deep water exploration requires huge amounts of capital and it involves the risk of not discovering hydrocarbons. ?It involves a lot of risk. You need to develop mechanisms and create the rewards for that risk that are in place and over time, a free market system is what any economy needs,? Dudley said.
A statement issued by BP later in the day said the purpose of meeting policy makers was to assure them of the companies? joint commitment to contribute to India?s energy security. The companies are now looking at ways to step up output from the D6 as well as other blocks.
?I am confident that we will be able to increase activity and output from these efforts sooner rather than later,? the statement said quoting Dudley.
Ambani said that the RIL-BP partnership is now focused but not limited to India. The energy majors will look at appropriate opportunities all over world for their synergy but initially, the focus is on creating value for India, Ambani told reporters.
The deal between them is an example of BP?s strategy of collaborating with strong national partners, taking material positions in significant hydrocarbon basins and increasing its exposure to fast-growing energy markets, the BP chief said.
Anand Sharma told FE after the meeting that he welcomed the RIL-BP deal considering the fact that higher domestic oil and gas output would help in lowering the oil import bill, which affects the country?s financial position.
The companies appreciated the positive investment climate in the country amid the dismal global economic scenario, Sharma said.
?It (higher oil and gas production) is good news for the country when we see some global economies coming under pressure due to the spiraling up oil prices. So we are fully supportive of this very important joint venture between the two global majors. Besides, it is good news for foreign direct investment too,? Sharma said.