$ 7.2 billion BP deal: ONGC's loss is Reliance's gain

While BP Plc yesterday agreed to pay USD 7.2 billion for a 30 per cent stake in most of Reliance Industries' oil and gas blocks including the gigantic eastern offshore KG-D6 fields, the UK firm had in 2005-06 proposed to partner ONGC in three of its deep-sea blocks off the east and west coast.

Industry sources said BP had made a formal proposal to take 40-50 per cent stake in Oil and Natural Gas Corp's (ONGC) Krishna Godavari and Gujarat-Kutch basin block but the then Oil Minister Murli Deora and DGH V K Sibal had rejected it.

The oil ministry had also frustrated ONGC's attempt to bring in Norwegian oil major Statoil and Brazil's Petrobras in its gas discovery block KG-DWN-98/2, which sits next to Reliance's giant KG-D6 fields.

ONGC had in August/September 2007, proposed farming out (or in simple terms given out) 15 per cent interest in the block to Petrobras and 10 per cent to Norsk Hydro (now Statoil Hydro).

But the ministry did not approve the farmout for almost a year, forcing the two companies to call it quits.

Oil Secretary S Sundareshan says New Exploration Licensing Policy (NELP), under which Reliance had won all the 23 blocks in which it is giving stake to BP, allows assignment of participating interest and his ministry will examine the Reliance-BP deal on merits.

ONGC too had won the KG-DWN-98/2 block in the same round of NELP in which Reliance got the neighbouring KG-DWN-98/3 or KG-D6 in 1999. But the state-owned firm never won approval to assign or farm-out interest to deepsea technology firms.

Sources said in case of BP, the UK firm was particularly interested in partnering ONGC in Kutch basin block GK-DW-1 that shared boundary with its blocks in neighbouring waters of Pakistan.

BP and ONGC had in September 2007 even signed a MoU for carrying out seismic surveys in the Kutch basin of Gujarat.

Sources said the oil ministry had used the ground that petroleum exploration license (PEL) for the three KG deepwater blocks was ending in May 2007 and for the Kutch block in August 2008. It did not deem it fit to extend the license and instead decided to offer the blocks in next bid rounds.

Despite British government pushing for the deal, the oil ministry held its ground and gave its final rejection in 2007.

Just around the same time, BP and Reliance entered into dialogue in what fructified into a deal where the UK firm picked 30 per cent stake in 23 out of Mukesh Ambani firm's 29 exploration blocks.