Reliance gets formal approval for BP deal

India's Reliance Industries on Tuesday said it has received formal approval from the Indian government to sell a 30 percent stake in some of its oil and gas blocks to BP for £4.39 billion. The sale is one of the largest foreign direct investments in India since the country started opening up its economy to the world two decades ago. India last month gave the green light to the deal, clearing the way for the energy giant to help explore and produce oil from hard-to-exploit deepwater reserves off India's coast and Tuesday handed over formal notification of its approval. "BP will take 30 percent stake in 21 oil and gas production sharing contracts that Reliance operates in India, including the producing KG-D6 block," Reliance said in a statement. "Following the approval, Reliance and BP will work together to conclude the deal expeditiously." The initial proposal was for Reliance to sell the stake in 23 blocks but the government cleared only 21 blocks. Reliance, India's largest private firm, has said it would continue to seek approval for the remaining two blocks. The BP-Reliance deal also envisages a performance payment of up to £1 billion if the tie-up leads to the discovery of more oil. Reliance shares were at a more than two-year-low of 767 rupees on the Bombay Stock Exchange on Tuesday, amid concern by analysts over slowing gas output from its oil fields off eastern India. Average gas production between April and June from Reliance's main KG-D6 block has fallen by over 30 percent to 48.60 million metric standard cubic meters a day (mmscmd), against a 70.39 mmscmd rate expected by the government. Reliance, controlled by billionaire Mukesh Ambani, hopes BP's deepwater drilling expertise will increase output from its fields. BP, meanwhile, will benefit from access to new hydrocarbon resources and markets. Such access has become especially important given the political upheaval in the oil-rich Middle East and north Africa. BP already operates oil and gas blocks in India and has a huge lubricant business, besides a solar power venture with the giant Tata group. India imports about 80 percent of its crude oil and has been frantically trying to find new fuel sources as the country's economy grows.