LONDON — BP PLC is paying India's Reliance Industries $7.2 billion to take a stake in key oil and gas blocks, gaining a significant foothold in the Asian country as it continues to reposition global operations following the disastrous Gulf of Mexico spill.
The tie-up, which could eventually amount to a $20 billion investment from BP, was announced Monday and includes an agreement between the two companies to form a joint venture to source and market gas.
London-based BP is making the initial payment for a 30 percent stake in 23 oil and gas blocks across India covering around 270,000 square kilometers, making the partnership the country's largest private sector holder of exploration acreage
"The partnership will combine BP's world-class deepwater exploration and development capabilities with Reliance's project management and operations expertise," the companies said in a statement after BP Chief Executive Robert Dudley and Reliance Chairman Mukesh Ambani signed the deal in London.
BP said that potential future performance payments, based on exploration success that results in development of commercial discoveries, are worth $1.8 billion while overall investment could eventually rise to $20 billion.
"India is one of the fastest growing economies in the world," said Dudley. "By allying ourselves with Reliance, we will access the most prolific gas basin in India and secure a place in the fast growing Indian gas markets, creating a genuinely distinctive BP position."
The deal marks another major strategic step for BP in the wake of the Gulf of Mexico oil spill last year.
The company earlier this month reported a $3.7 billion loss for 2010 – its first loss in almost 20 years – as a result of the Deepwater Horizon disaster. It also announced plans to rebound from the Gulf of Mexico by looking outside the United States, where it is selling almost half its U.S. refinery business.
"This partnership meets BP's strategy of forming alliances with strong national partners, taking material positions in significant hydrocarbon basins and increasing our exposure to growing energy markets," BP Chairman Carl-Henric Svanberg said of the Reliance deal.
The Reliance deal comes a month after BP signed an $8 billion share swap deal with Russia's OAO Rosneft to explore the Russian Arctic region.