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RIL, BP unveil version 2.0 of their energy partnership

Six years after BP first invested in RIL's energy assets, the two companies are stepping on the gas for development of new gas fields and expanding ties to explore unconventional, low-carbon energy development

By Aveek Datta Forbes India Staff
Published: Jun 15, 2017

Over a decade in financial journalism, I have specialized in covering news that matters to India Inc. and its stakeholders, including developments at India's largest corporations and and MNCs. The subject of my writing has been analysis of strategy, financial performance, M&A and fundraising activity, consumption behaviour and emerging trends in management and leadership. Industry verticals that I have written on include oil & gas, power, infra, metals & mining, auto, telecom, FMCG & retail, and start-ups. I also play the role of an editorial lead for proprietary events like the Forbes India Leadership Award and the Forbes India CEO Dialogues. An alumnus of Asian College of Journalism, Chennai and Jadavpur University, Kolkata, I have worked for publications such as Mint, The Financial Express and The Indian Express before this.

mg_97187_rtx10ddy_bg_280x210.jpgRIL chairman Mukesh Ambani
Image: Danish Siddiqui/Reuters

For a few years now, most of the news flow that has emanated from Reliance Industries Ltd (RIL) has been around Reliance Jio – the conglomerate’s fledgling fourth generation broadband wireless business that has disrupted the telecom market with its aggressive pricing and data offers.

Indeed, RIL chairman Mukesh Ambani, at several public forums, has even called data the “new oil”, suggesting that data will be the next game changer for his $51 billion-conglomerate in the future, just as oil refining was over the last two decades. But Ambani’s press conference on Thursday was an indication that while data may be the new oil for RIL, it still sees significant upside from its traditional energy business, albeit in a changed form.

At a joint press briefing held by Ambani, India’s richest billionaire, and Bob Dudley, group chief executive of BP Plc, the UK-based energy giant, the two industry leaders said that their companies will be jointly investing Rs40,000 crore to develop three hydrocarbon projects that would see RIL achieve a gas production of 30-35 million standard cubic meter per day (mscmd) over the next three to five years – a production level that Ambani hopes will sustain for the next seven to eight years. These projects include development of the R-Series deep water gas fields in the KG-D6 block in the Krishna-Godavari basin, off the eastern coast of India.  

“It is high time that KG-D6 is brought to its full potential. India shouldn’t have to import gas,” Ambani said. RIL and BP’s decision to revive investments in the oil and gas space comes after a significant time gap and is a function of the reformist approach taken by the current government to ensure India’s energy security, said Dudley.

“With oil prices being low and capital being scarce we have to choose very carefully the projects that will be competitive in our global portfolio,” Dudley said, highlighting the potential that it sees at its Indian operations.   

RIL and BP’s upstream hydrocarbon production business has struggled over the last few years as output from its flagship asset, the KG-D6 reservoir has progressively declined. In FY2017, RIL’s oil and gas production business reported a turnover of Rs5,191 crore, down 31 percent year-on-year. It accounted for a mere 1.5 percent of its consolidated turnover, with an operating loss of Rs1,584 crore.  

In addition to expanding the scope of its traditional hydrocarbon operations, for which BP entered into a joint venture with RIL in 2011 by acquiring a 30 percent stake in the latter’s portfolio of oil and gas assets, the two companies will also expand the scope of their partnership to explore the development of different kinds of fuel that would aid unconventional mobility, and advanced low-carbon fuel sources.

While exact details of this enhanced partnership weren’t disclosed at the conference on Thursday, there were ongoing studies on what these two companies can jointly achieve and announcements highlighting specific initiatives will be made from time to time, Ambani said.

Some of the areas of operation that Ambani hinted at include fuel for electric vehicles and renewable energy.  “We expect to collaborate, in addition to the conventional fuels and aviation marketing, on unconventional mobility solutions, addressing electrification, digitization and disruptive mobility trends,” Ambani said. The RIL chief also spoke of innovation in the space of “new energy delivery systems” that would be developed keeping the needs of India in mind, which if successful can be scaled up and replicated in other markets around the world.
      
Jio and its digital services will have a role to play in RIL and BP’s ambitious energy partnership as well. “We will bring the assets and infrastructure of Jio to create an energy internet with a distributed framework," Ambani stated.

(Reliance Industries is the owner of Network 18, publisher of Forbes India)

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