BP Plc writes off $790 m investment in KG-D6 block.

BP Plc has written down the value of its investment in eastern offshore KG-D6 block by $790 million besides another $830 million in impairment charges, following lower-than-expected gas price hike.

Announcing its fourth quarter and full 2014 results, BP said: 'Third quarter, fourth quarter and full year 2014 include write-offs of $375 million, $20 million and $395 million respectively relating to block KG D6 in India.'

'In addition, impairment charges of $395 million, $20 million and $415 million for the same periods were also recorded in relation to this block,' it said.

The company did not explain the reasons for the write-off and impairment charges.

BP in 2011 bought 30 per cent interest in Reliance Industries’ eastern offshore KG-D6 as well as 20 other oil and gas exploration blocks for $7.2 billion. Bulk of this was for the producing block of KG-D6 and gas discovery area of NEC-25.

The government had on October 18 last year approved a new formula for pricing of all domestic gas. The rate, when the formula comes into effect from November 1, would be $5.61 per million British thermal unit as against current $4.2.

The price is lower than $8.4 approved by the previous UPA government and general expectation of a rate around $6.5 after some deductions from that price.

Both BP and RIL have been advocating market-linked gas pricing and had initiated an arbitration against the government for not revising rates from the due date of April 1, 2014.

The $4.2 per mmBtu rate, fixed in 2007, was for the first five years of production from KG-D6 fields. KG-D6 fields started gas output from April 1, 2009.

RIL is the operator of KG-D6 block with 60 per cent stake while the balance 10 per cent is with Canada's Niko Resources.


HBL