India's Reliance halts future oil and gas drilling
India's energy giant Reliance Industries has suspended drilling at its oil and gas exploration blocks covered under a deal with new venture partner BP pending a review, a company source said on Monday.
India's largest private oil explorer is "re-evaluating" its exploration and production strategy in partnership with the British company but current oil and gas production was unaffected, the source told AFP.
"With BP as our strategic partner, it makes sense to do a fresh review of our portfolio and come back with a new strategy," the source added, without specifying a timeframe for when new drilling would restart.
"We will re-look to ascertain if we were going the right way," the source said.
Once completed, the reassessment will be shared with India's upstream oil and gas regulator, the Directorate General of Hydrocarbons (DGH).
Reliance, controlled by India's richest man Mukesh Ambani, recently concluded a $7.2 billion deal with BP, selling it a 30 percent stake in 21 of its oil and gas fields off the Indian coast.
Reliance hopes BP's deepwater drilling expertise will increase output from its hard-to-exploit deepwater reserves. BP, meanwhile, will benefit from access to new hydrocarbon resources and markets.
The re-evaluation will also help Reliance to optimise drilling costs, which are thought to be too high for deepwater and ultra-deepwater fields, the source said.
The source said a team from BP would be deployed to review the data and suggest changes -- if any.
Reliance shares slid 3.88 percent on the Bombay Stock Exchange on Monday on concerns about refining margins and slowing gas output.
Its shares have fallen 30 percent this year on persistent worries over declining gas production at its main D6 fields in the Krishna-Godavari basin off eastern India.
Last month, the DGH said Reliance was producing 44 million standard cubic metres per day (mscmd) from its main exploration field, well below the 60 mscmd it produced a year earlier.
Reliance is India's most valuable company with the heaviest weighting on the Bombay Stock Exchange's benchmark Sensex index.
The company has been diversifying its sources of revenue to expand from the core energy sector into financial services, retailing, hotels and communications.
Deepak Pareek, an oil analyst with Mumbai's Prabhudas Lilladher brokerage, said Reliance and BP could finalise their exploratory plans from early next year.
"Reliance is likely to be much more prudent before drilling wells due to high cost involved," Pareek said in a note to clients.
At the same time, "the long-term promises of Reliance's exploration and production is undeniable," he added.
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.
Reliance operates the worlds largest oil-processing complex in Jamnagar, western India, where two adjacent refineries can process a combined 1.24 million barrels of oil a day.
© 2011 AFP