MUMBAI A joint venture led by Reliance Industries and BG Group will hand drilling infrastructure from an abandoned Indian gas field to ONGC Ltd, a boost for ONGC's plans to develop a key gas reserve nearby, two company sources said.
Executives from Reliance, BG and the state-run oil firm ONGC have been at odds for months over the cost of closing the Tapti field off the country's west coast.
But after government mediation, the three signed a deal on Tuesday that will see the equipment handed over without charge, with Reliance and BG saving on dismantling costs.
The sources, with direct knowledge of the matter, declined to be named as they are not authorised to talk to the press.
ONGC plans to invest around 100 billion rupees ($1.5 billion) to develop the giant Daman field, which is next to Tapti. The equipment deal will help the group keep a lid on costs - buying and setting up equipment from scratch could cost up to 40 billion rupees ($600 million), one of the sources said.
The deal will also speed up development by three years.
Daman, now set to produce from 2018, is expected to produce 10 million metric standard cubic metres per day (mmscmd) of gas, or 15 percent of ONGC's current natural gas production.
The Tapti infrastructure includes an offshore platform and a 70-kilometre pipeline connecting the platform to ONGC's gas terminal at Hazira in Gujarat.
Reliance, ONGC and BG, now owned by Royal Dutch Shell, did not immediately comment.
The second source said the companies would continue to talk on other closure costs.
($1 = 66.6250 Indian rupees)
(Reporting by Promit Mukherjee; Writing by Krishna Das; Editing by Clara Ferreira Marques and Mark Potter)
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