New Delhi: The petroleum ministry has warned the Prime Minister’s Office (PMO) that the “non-clearance” of blocks awarded under the New Exploration and Licensing Policy (Nelp) “may lead to exodus of foreign companies who were brought with assurance of conducive investment environment”, in a candid admission that reflects the rapidly diminishing interest in the Indian hydrocarbon sector.
Nelp was approved by the government in 1997—it kicked off in January 1999—in an effort to boost hydrocarbon exploration in the country. Under Nelp, the government allocates the rights to explore blocks through a bidding process and has done this in nine phases so far for 249 blocks.
Interestingly, while clearances from the ministries of defence, home affairs and environment and forests, the department of space, and the Survey of India are obtained in advance before the auction, 46 blocks face issues related to such approvals. An investment of around $11.8 billion (around Rs65,845 crore today) has been made in these 46 blocks.
In a 2 July presentation made to Pulok Chatterjee, principal secretary to the Prime Minister, that was reviewed by Mint, the petroleum ministry stated that such “non-clearance will adversely affect investment environment for future”, and further that “non-clearance at later stages may lead to litigation and claims for damages”.
This comes against the backdrop of accusations that the Congress party-led United Progressive Alliance has been guilty of policy paralysis that has seen a decline in both foreign and domestic investments in India.
Of the 194 Nelp blocks under operation, 79 faced clearance issues. The petroleum ministry took up the issues of 73 blocks with the defence ministry. The issues were resolved for 27 blocks, but permissions are pending for 46 blocks. Work on the remaining six blocks has been held up due to other reasons, including objections from states where they are located.
The PMO didn’t respond to Mint’s queries despite repeated attempts.
While a petroleum ministry spokesperson declined to comment, a senior petroleum ministry official who spoke on condition of anonymity said, “We have taken up the issue at the highest level, and within 10-15 days, around 36 blocks may be given clearance. Of the remaining 10 blocks, clearance is not advisable from the national security perspective, which is paramount. Also, we may get a partial clearance for the remaining two blocks.”
A defence ministry spokesperson hadn’t responded to queries at the time of going to press.
While India’s oil and gas sector attracted interest from investors such as London-based BP Plc and Vedanta Resources Plc last year, in recent months there has been diminishing interest in the area, prompted largely by the policy regime, with foreign firms planning to exit their oil and gas exploration and production business in India.
A case in point is Australia’s Santos Ltd’s exit plans, which come in the backdrop of the Indian government’s inability to resolve a maritime boundary dispute with Bangladesh regarding a block in the Bay of Bengal. The Bangladesh Navy has repeatedly denied Santos International Operations Pty Ltd access to its blocks in the Bengal Basin. The northern waters of the Bay of Bengal have been the subject of an ongoing dispute involving India, Bangladesh and Myanmar.
The developments also come in the backdrop of India’s ninth round of auctions of hydrocarbon exploration blocks that reflected poor investor interest; only 13 of the 33 blocks on offer were formally awarded in March, a year after the bids were received—the delay was on account of the inability to get clearances. While one block failed to elicit a bid in March last year, 33 blocks received 74 bids, mostly from state-owned companies such as Oil and Natural Gas Corp. Ltd.
India’s domestic energy supplies are limited, and import dependence is as high as 80% for crude oil and 25% in the case of natural gas. The country is currently the world’s fourth largest consumer of energy after the US, China and Russia. It accounts for 4.4% of the world’s annual energy consumption.
Liz Mathew contributed to this story.