RIL and BP ready to drop arbitration over gas prices

Mumbai / Bloomberg

Reliance Industries Ltd. and BP Plc are seeking to end their disputes with the Indian government over an offshore natural gas block, one requirement for the companies before they can take advantage of new pricing policies, according to people familiar with the development.
The two explorers and a third partner, Canada’s Niko Resources Ltd., are preparing to withdraw from arbitration proceedings against Prime Minister Narendra Modi’s government by December, said two of the people, who asked not to be identified as the information isn’t public. The three partners will need the approvals of their respective boards before withdrawing arbitration, the people said.
Reliance and BP Plc intend to complete the withdrawal from multiple arbitration proceedings, at least one dating back to 2011, before they finalize plans to restart developing discoveries in the KG-D6 block off the east coast of India, among other exploration areas they hold. Reliance issued a tender last month seeking to hire an engineering and design company for its deepwater oil and gas fields.
The withdrawal is a requirement for the companies to receive higher gas prices available through a government policy revision in March to encourage development of deepwater fields. Oil Minister Dharmendra Pradhan had said then that gas producers need to end disputes with the government to be eligible for the new prices.
“Apart from adversely affecting India’s oil and gas output, such disputes have also hurt India’s image as a serious exploration and production destination,” Pradhan said.
Reliance shares gained as much as 1.3 percent to 952.45 rupees in Mumbai and traded at 949.80 rupees as of 3:14 p.m. local time. BP rose as much as 1.5 percent to 363 pence in London.
Reliance owns 60 percent of the KG-D6 block, BP Plc holds 30 percent and Calgary-based Niko Resources Ltd. has 10 percent. Reliance and BP spokesmen declined to comment. Niko didn’t respond to e-mailed requests for comment.