LONDON: British energy giant BP and India's Reliance Industries announced Monday a massive investment deal which could be worth up to $20 billion with later investment in key Indian oil and gas assets.
BP said it will pay $7.2 billion (5.3 billion euros) to Mumbai-based Reliance Industries for a 30-percent stake in 23 Indian oil and gas blocks, announcing another major foreign venture as it seeks to put last year's Gulf of Mexico oil spill disaster behind it.
Earlier this year, it joined forces with Russia's Rosneft in what could be another transforming deal to explore for oil in the Artic region.
"BP will pay Reliance Industries Limited an aggregate consideration of US$7.2 billion, and completion adjustments, for the interests to be acquired in the 23 production sharing contracts," the tow firms said in a joint statement.
"Future performance payments of up to $1.8 billion could be paid based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to US$20 billion."
Mukesh Ambani, chairman and managing director of Reliance Industries Limited, and Robert Dudley, BP chief executive, signed the deal in London on Monday.
"The partnership will combine BP's world-class deepwater exploration and development capabilities with Reliance's project management and operations expertise," the two groups added.
The Indian news marks BP's latest attempt to move on following the devastating Gulf of Mexico oil spill disaster last year which forced it to set aside billions to cover environmental damage and tainted its reputation.
Crisis-hit BP reported its first annual loss in almost two decades earlier this month, as a result of the oil spill catastrophe, and outlined fresh plans to shift its focus away from the United States.
BP suffered a loss of $4.9 billion last year, the first shortfall since 1992 and compared with a massive profit of $13.96 billion in 2009.
The group has also announced plans to halve its US refining business.
Analysts in India hailed the accord as a huge boost for Reliance and the country which has been trying to boost energy production to meet the needs of its booming economy.
"This is a huge sentiment booster for Reliance and the country, demonstrating that its oil blocks have strong credibility," said Sonam Udasi, head of research with Mumbai-based IDBI Capital.
The BP cash will also help Reliance build its war-chest for further expansion, Udasi told AFP.
Reliance has generated two billion dollars through the sale of shares since September 2009 and is expected to keep raising cash to boost its reserves and ability to make acquisitions.
Reliance operates the world's largest oil-processing complex in Jamnagar, western India, where two adjacent refineries have a combined capacity to process 1.24 million barrels of oil a day.
The deal was announced after trading on the Bombay Stock Exchange closed for the day, with Reliance Industries shares up more than 2.0 percent by the close.
In London, BP was slightly firmer in a market little changed overall.
Apart from the oil and gas blocks, BP and Reliance will also set up a 50-50 joint venture for the sourcing and marketing of gas in India.
Mukesh Ambani said the accord will "significantly contribute to India's energy security."
"India is one of the fastest growing economies in the world," Dudley said.
The statement described the deal as "one of the largest foreign direct investments into India," covering some 270,000 square kilometres.
The production sharing contracts currently produce more than 30 percent of India's total gas consumption and more than 40 percent of its total production.
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