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BP gives up 12 of 21 oil & gas blocks bought in 2011

In February 2011, BP had bought 30% stakes in a total of 23 oil & gas blocks of Reliance Industries Ltd

United Kingdom’s BP plc has surrendered, 12 out of the 21 oil and gas blocks where it had bought 30% stake from Reliance Industries for $7.2 billion, due to poor hydrocarbon prospects. BP had in February, 2011 bought 30% stake in a total of 23 oil and gas blocks of RIL including the gas discovery areas of KG-D6 and NEC-25. The Cabinet had, however, approved of BP taking stake in 21. RIL-BP have since then given up 12 areas.

‘As part of continued evaluation of high grade, the portfolio and focus our efforts, 12 of the blocks acquired were relinquished in 2012,’ BP said in its annual report for 2013. The joint venture is currently focused on reviving the flagging eastern offshore KG-D6 fields and bringing the North-East Coast NEC-25 discoveries to production.

Besides the nine blocks with RIL, BP also holds 50% interest in a Krishna Godavari basin exploration block. As a result the relinquishments, RIL’s portfolio of oil and gas blocks has come down from 28 to just 13.

RIL has given up the Sonhat coal-bed methane (CBM) block SH(North)-CBM-2003/II, in the Gondwana coal fields, as well as some exploration acreage it held solely, the company said in its annual report for 2012-13.

BP in its annual report said it along with RIL continued to work on activities that will help ramp-up output from KG-D6. ‘Activities to arrest the decline in production on Block KG-D6 fields were approved by the relevant authorities and execution planning has commenced,’ it said.

The government also approved the submitted Field Development Plan (FDP) of Satellite-I discoveries and declaration of commerciality of R-Series finds in the block. In all, 18 gas fields have been discovered in KG-D6 block so far. Of these, only two (Dhirubhai-1 and 3) have been put to production. Satellite fields are now being planned to be developed.

RIL said the fall in production to about 15.5 million standard cubic meters per day was mainly due to ‘geological complexity, natural decline in the fields and higher than envisaged water ingress’.

To augment production from the current fields (D1-D3 and MA oil and gas field), various Base Management actions, including work overs, side tracks, compressor, enhancement of water handling capacity and a new well in the MA field, will be undertaken in FY2013-14.

‘The next wave of projects in KG-D6 block are envisaged to be undertaken over the next three to five years and entail a potential total investment in excess of $5 billion to develop around four trillion cubic feet (TCF) of discovered natural gas resources,’ RIL said.

BP lobbies for more price sops

Meanwhile BP plc has asked Prime Minister Manmohan Singh for a $1.5 per mBtu additional “incentive” for deep-sea fields over and above the near doubling of domestic gas price suggested by the Rangarajan Committee.

BP chief executive Bob Dudley on April 15 wrote to the Prime Minister seeking a clear road map to market determined pricing of natural gas, saying it will help the country reduce its import of liquefied natural gas (LNG).

He said the Rangarajan panel suggested a pricing model, which would lead to domestic rates going up from $4.2 per million British thermal unit (mBtu) to about $8, would be roughly half way to international prices.

“If the government chooses the mid-way pricing recommendation of the Rangarajan Committee, I respectfully request the government to consider... ‘an additional price incentive of $1.5 per mBtu’ for deepsea fields to compensate for high cost and exploration risks,” he wrote.

The incentive for deepsea fields being sought already exist in Pakistan which promises a minimum price of up to $9 for ultra deepsea fields to make up for high cost and exploration risk associated with such a development.

Dudley said the government needed to come out with a schedule of “quarterly increases over the three-year period” to move to an “arms-length market determined price”. “In the Indian context, this is represented by the landed price of LNG,” he said.

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