LONDON (Reuters) – BP is to make one of the biggest foreign direct investments in India through an oil and gas tie-up with Reliance Industries, which involves the oil major paying $7.2 billion to the Indian company.
Under the terms of the deal, BP will take a 30 percent stake in 23 oil and gas blocks and form a 50:50 joint venture between the two companies for the sourcing and marketing of gas, the companies said in a statement on Monday.
"This partnership combines the skills of both companies and will be focused on finding more hydrocarbons in the deep water blocks of India and significantly contribute to India's energy security," Mukesh Ambani, Chairman and Managing Director of Reliance Industries Limited, said in the statement.
BP will pay Reliance Industries an aggregate consideration of $7.2 billion and future performance payments of up to $1.8 billion could also be paid if exploration success leads to the development of commercial discoveries.
"This partnership meets BP's strategy of forming alliances with strong national partners, taking material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets," BP Chairman Carl-Henric Svanberg said in the statement.
The companies said the future performance payments and the combined investment could amount to $20 billion in total.
The market welcomed the deal, with analysts highlighting the importance of the tie-up as a sign of investor confidence in India and the country's oil potential.
BP's shares were up 0.3 percent at 494.4 pence at 1108 GMT. Reliance Industries shares were up 2 percent.
"It is a big positive in terms of getting foreign direct investment into India. It shows the confidence in India at large and its oil and gas potential," Sandip Sabharwal, CEO of portfolio management services at Prabhudas Lilladher in Mumbai said.
"This deal could be the first of many more to follow," he added.
BP already has a presence in India in addition to its interest in deepwater block called D-17, which it has been working on with Reliance since late 2008.
Castrol India Limited is a leading player in the retail automotive lubricant business, including car engine oils, premium 4-stroke motorcycle oils and multi-grade diesel engine oils, BP said.
(Writing by Alexander Smith; Editing by Louise Heavens)
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