BP CEO to to discuss India’s low gas prices in meeting with Modi; considering divestments – source

03 Nov 2015 – BP [LON:BP] CEO, Bob Dudley, plans to meet with India’s Prime Minister, Narendra Modi, during his state visit to the UK in November to persuade him to raise the price of the country’s gas, a company source said. Failure to raise the gas price may result in BP divesting from the country, the source added.

In 2011, BP bought a 30% stake in the east coast Krishna–Godavari Basin for USD 7bn, India’s largest discovery to date. Indian conglomerate, Reliance [BOM: 500325], holds 60% of the project as well as operatorship. Candadian firm Niko Resources [TSX: NKO] owns the remaining 10%.

BP also holds a 30% stake in the Cauvery and Mahanadi basins, with Reliance owning the remaining 70%. The two firms also have a 50-50 gas marketing joint venture called India Gas Solutions Pvt.

India controls the price of its locally produced gas. On 1 October, it set the price at USD 3.82 per million British thermal units, an 18% reduction from the previous six months.

India needs to use a market-based price for these projects to turn a profit, the source said.

The previous government, under Manmohan Singh, promised to change the gas pricing structure when BP invested in India, the source said, adding that this was not undertaken, which turned it into a loss-making project.

“India has been a disaster for BP,” a sector lawyer commented. “There have been several delays to the projects, and they aren’t likely to become profitable.”

It is possible that BP will exit the country if the situation remains, the source said, adding that gas prices in India are deterring international investors.

“We’re aware of the plans for Prime Minister Modi’s visit, but we cannot comment on its schedule,” a spokesperson for BP said. The spokesperson declined to comment on whether the major is considering divesting assets in India.

The Indian government’s Ministry of Petroleum & Natural gas did not respond to a request for comment.  

by Katie McQue

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