Hardy Oil not to raise stake in Reliance gas block

NEW DELHI: UK's Hardy Oil and Gas Plc today said it will not exercise the option to raise its stake in a Reliance Industries-operated gas block, which is one of the 23 areas where the Mukesh Ambani firm is selling 30 per cent interest to BP Plc for USD 7.2 billion.

Reliance is selling a stake in 23 oil and gas block it had won under various rounds of New Exploration Licensing Policy (NELP) rounds along with partners like Niko Resources of Canada and Hardy since 1999.

NELP allows firms to sell or farm-out participating interest (or stakes) subject to the preemption right of the consortium partner.

In a statement, Hardy said, "It has elected not to exercise an option to increase its participating interest by 3 per cent in the D3 (KG-DWN-2003/1) exploration licence."

The UK firm holds a 10 per cent stake each in the Reliance-operated D3 and D9 blocks in the Krishna-Godavari Basin and onland Assam-Arakan basin block AS-ONN-2000/1.

In each of the blocks, Hardy had an option to raise its stake by 10 per cent of the interest that Reliance was selling to BP, i.e. by 3 per cent.

Hardy said it had previously waived its option in the case of D9 and the Assam block, but had retained it in the case of the D3 gas discovery block.

"If exercised, the consideration for the exercise of the 3 per cent option in D3 would have been a cash payment by Hardy to Reliance of approximately USD 150 million, payable in three installments over a seven-month period from the closing of the BP acquisition," Hardy said in the statement.

Going by Hardy's calculation that put the gross value of D3 at about USD 5 billion, BP is paying USD 1.5 billion for the 30 per cent interest in that block alone.

"After due consideration of the company's cash position and future capital requirements under the existing Production Sharing Contracts, the board has elected not to exercise this option which has now lapsed and so Hardy's participating interest in the D3 exploration licence will remain at 10 per cent," Hardy said in the statement.

To date, four exploration wells have been drilled in the 3,288 squre kilometre D3 block that sits in water depths ranging from 400 metres to 2,200 metres.

All the four wells resulted in natural gas discoveries. Hardy CEO Yogeshwar Sharma said: "The acquisition by BP of a 30 per cent interest in the D3 exploration licence is a significant endorsement of the resource potential of this extensive exploration block."

"We remain in the early stages of exploration with a growing prospect inventory and several untested play types. We welcome BP's involvement in D3 and look forward to further drilling following early exploration success on this block," he added.