Reliance–BP deal wins Euromoney Deals of the year 2011 award

The eventual realization of the deal between Mukesh Ambani-owned Reliance Industries Limited (RIL) and Robert Dudley-led London based energy giant BP Plc. was recently acknowledged by the UK based business and finance publication Euromoney as one of the winners of Euromoney Deals of the year 2011 award.

The $9 billion deal, which caught global attention for its sheer scale and scope, was one of the most talked about and scrutinized deals of 2011. It saw the coming together two of the most powerful energy-based companies in the form of a mutually beneficial partnership across the full value chain that made headlines across the world. This deal involves BP taking a 30 per cent stake in 23 oil & gas production sharing contracts, that Reliance operates in India, including the active KG D6 block (one of RIL’s many major undertakings) and the formation of a 50:50 joint venture between the two companies for the sourcing and marketing of gas in India. The joint venture will also endeavour to accelerate the creation of infrastructure for receiving, transporting and marketing of natural gas in India, as indicated in respective company statements regarding the deal. BP has paid Reliance Industries Limited an aggregate consideration of US$7.2 billion and future performance payments of up to US $1.8 billion with respect to development of commercial discoveries.

The deal has been monumental for many reasons. For one, the transaction has resulted in one of the largest foreign direct investments (FDI) into India. The partnership, spanning across 27,000 sq.km of acreage, is India’s largest private sector holder of exploration acreage. While RIL has been able to gain access to the cutting energy exploration technologies by BP, the latter now holds a key to explore the prolific opportunities that lie in energy rich regions of the country. Consequently, by combining RIL’s exemplary management skills with BP’s sophisticated technological skill sets, the Reliance-BP deal will be seen harnessing energy resources of India in possibly the most sustainable way, including energy development prospects in Reliance KG D6 fields.

On a more sentimental level, this deal has shored up the reputation of both signing partners. For BP, this deal has bleached out just about every stain that mottled BP’s reputation following the Gulf of Mexico spill. At the same time, RIL was able to silence the many voices that questioned its capabilities as an erudite player in the Indian energy sector.

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