(Updates with closing share price in the sixth paragraph.)
Jan. 4 (Bloomberg) -- Billionaire Mukesh Ambani’s Reliance Industries Ltd. and BP Plc won government approval to spend $1.5 billion to develop four discoveries that may increase output from India’s biggest natural gas field, three people with direct knowledge of the matter said.
A government panel endorsed the plan aimed at producing about 10 million cubic meters of gas a day from the satellite fields in the KG-D6 block off India’s east coast, the people said yesterday, asking not to be identified because the matter hasn’t been made public. Output from the area may start by 2015, one of the people said, behind the date of 2014 flagged by BP Chief Executive Officer Robert Dudley in September
Production at KG-D6 in the Bay of Bengal has been declining since 2010, and it’s operating at less than half the peak rate of 80 million cubic meters a day projected by the government and Reliance. BP had expected the approval last month, which would have allowed sub-sea work to be done from December to March, when waters are calmer, the people said.
“Approvals after all this while are definitely welcome, but it ideally should have come quicker,” said Deepak Pareek, a Mumbai-based analyst with Prabhudas Lilladher Pvt., who has an “accumulate” rating on Reliance. “We still have to see how much work they can finish before the weather starts getting rough in the offshore field.”
S.K. Srivastava, the industry regulator, and Oil Secretary G.C. Chaturvedi didn’t answer two calls each to their mobile phones seeking comment. Tushar Pania, a spokesman for Reliance, declined to immediately comment.
Reliance slumped 35 percent last year, the most since 2008, as output from the KG-D6 deposit dropped. The stock declined 1.2 percent to 716.15 rupees at the close in Mumbai trading. The benchmark Sensitive Index fell 0.4 percent.
The panel comprising officials from the oil ministry and the Directorate General of Hydrocarbons, which regulates exploration and production of oil and gas, met in New Delhi yesterday.
The plan to develop the satellite fields was rejected at a meeting on Dec. 2 and Reliance and BP were asked to rework it, according to one of the people. A meeting scheduled on Dec. 27 was canceled a few hours before it was due to start.
Reliance and BP would need at least four weeks after getting approvals to mobilize ships, rigs and workers, three people with direct knowledge of the matter said.
BP, Europe’s second-largest oil company, last year completed a $7.2 billion acquisition of a 30 percent stake in 21 fields operated by Mumbai-based Reliance.
At a meeting with Oil Minister S. Jaipal Reddy in Doha in December, Dudley expressed concern about the delay and in a subsequent letter said the inability to commence sea-bed surveys that month would push back production plans by a year, the Press Trust of India reported Jan. 2, citing the BP CEO’s letter.
“These are routine communications and it is not appropriate to discuss specific issues under review by the government,” BP’s London-based spokesman Mark Salt said in an e-mailed statement yesterday.
Reliance produces about 38 million to 39 million cubic meters a day of gas from three areas in the KG-D6 block, Oil Secretary Chaturvedi said Dec. 21. The block produced 60 million cubic meters in June 2010.
Five of 18 wells at the D1 and D3 fields in the block have stopped producing gas, Minister Reddy said in parliament Dec. 15. Reliance has drilled 22 wells out of 31 targeted by March and the company has said it is unable to find drilling locations because of geological complexities, the minister said.
--Editors: John Chacko, Andrew Hobbs
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