Since the Deepwater Horizon accident, BP has sought to divest itself of U.S. holdings and geographically move to the East.
BP pays out 7.2 billion for a 30 percent share of Reliance Industries. In a press release, BP announced it will pay $7.2 billion for a 30% stake in 23 oil and gas properties in India operated by Reliance Industries, the firm controlled by India’s richest man Mukesh Ambani. The deal also includes plans for a 50/50 joint venture to source and market gas across India.
Ambani and BP chief Robert Dudley, who succeeded Tony Hayward in the wake of the Deepwater Horizon disaster last year, signed the agreement in London.
Taken along with last month’s joint venture on Arctic drilling with Russia’s Rosneft, the Indian deal signals the latest step in BP’s bid to decrease its U.S. exposure following the spill and the subsequent unloading of a number of assets in North America and elsewhere.
While the impetus for the geographical shift in strategy was no doubt a tragic one, the change may be positioning BP to take advantage of far faster growth in developing economies than there is to be found in the U.S. and other mature markets.
Developing economies,aka countries with fewer regulations and less concern for safety and the environment.
As with the Russian deal with Rosneft, Reliance will get cash and technical expertise, BP will gain access to vast territory recently opened for oil and gas exploration.
In recent years, India, which imports most of its oil, has opened vast swathes of its territory to oil and natural gas development. Reliance, which is led by India’s richest man, Mukesh Ambani, has become India’s largest producer of natural gas because of a rich offshore field in the Bay of Bengal near the state of Andhra Pradesh.
“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’s chairman, Carl-Henric Svanberg, said in a statement.
For Reliance, the deal provides cash and, perhaps more important, oil and natural gas expertise that it needs as it explores and produces in fields that cover 270,000 square kilometers, or about 104,000 square miles. The output on Reliance’s most productive natural gas field in the Bay of Bengal has declined in recent months, which has worried analysts and policy makers who are counting on the field to fuel power plants and fertilizer factories.
In addition to its interests in Indian exploration, Reliance has been investing in shale gas fields in the United States, including a joint venture with Atlas Energy to drill in the Marcellus Shale.
BP has already partnered with Reliance, India's largest privately owned company, on one offshore well. The deal has to be approved by Indian regulators but India imports most of its oil and has increased energy needs as it's economy grew 9 percent last year. Dudley visited India and spent time with India's Prime Minister and other government officials last October. Just saying.
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