One of the largest foreign direct investments into India to-date is being made by UK's oil giant, BP, in a $7.2bn deal with India's Reliance Industries. BP is to own 30% of 23 oil and gas blocks and form a 50:50 joint venture with Reliance, India's largest private company, for deep water oil exploration and the sourcing and marketing of oil and gas. BP is to pay Reliance Industries $7.2bn and performance payments of up to $1.8bn if the tie up leads to the development of commercial discoveries. Reliance runs the world's biggest refining complex at Jamnagar in the western India state of Gujarat and its two plants have a combined capacity of 1.2 million barrels a day. The company has also been buying U.S. shale gas assets.

The above deal is very welcome news for India as a sign of investor confidence in the country and, in particular, for the country's oil and gas potential which could transform the country's fortunes. India currently imports about 70% of its oil requirements and this is estimated to rise over 80% in the next 15 years to fuel a growing economy if no oil/gas is found domestically. Oil accounts for about 30% of the country's energy needs.

Eoin Treacy's view BP's reputation as a reliable deep water driller has been tarnished in the USA. However, the Gulf of Mexico incident has not been a major obstacle to it signing deals with both Russia and India over the last few months. The attractions of both jurisdictions have obvious advantages. Russia as one of the most prolific producers of oil and gas is an enviable area for a company such as BP to gain access to. India as a growing economy where per capita consumption of energy is on a secular uptrend and which is relatively unexplored is another attractive location. A joint venture with Reliance Industries also gives BP privileged access to some of India's primary decision makers which will be essential to ensure the correct permitting is received.

BP continues to rebound and has sustained a progression of higher reaction lows since hitting 300p in June. A sustained move below 475p would be required to question potential for some additional upside.

Reliance Industries has been ranging between INR875 and 1200 since mid 2009. It is currently rallying from the lower side and a sustained move above INR1200 will be required to reaffirm medium-term demand dominance.