Home/ Companies / News/  BHP Billiton exits oil and gas blocks in India

New Delhi: BHP Billiton Ltd, the world’s largest miner, has surrendered 10 oil and gas exploratory fields it won at government auctions because its permission to explore was not cleared by India’s defence establishment.

An exodus of overseas firms, because clearances regarding blocks awarded to them under the new exploration licensing policy (Nelp) are delayed or denied, was feared by the oil ministry as it would hamper India’s quest for energy security.

BHP Billiton has exited all its Nelp blocks (other than the one with BG Group) because of delays in defence clearance," a person familiar with the development said, requesting anonymity.

The move also puts paid to the upstream ambitions of GVK Power and Infrastructure Ltd as it has a majority stake in seven of the 10 blocks BHP Billiton has surrendered as operator.

However, the Anglo-Australian miner has not exited from the MB-DWN-2010/1 deepwater field in the Mumbai basin in which it signed a production-sharing contract in 2012 with the government along with UK’s BG Group Plc. The two firms have equal stake in the block.

The development was confirmed by a petroleum ministry official. “There was a pending issue with the ministry of defence and no full-scale clearance was given," he said, also declining to be named. “BHP was raising issues of blanket clearance."

Rajnish Gupta, India country manager of BHP Billiton, and a GVK spokesperson did not respond to emailed queries sent on Friday.

“BHP has been toying with the idea of what to do with these blocks since defence clearance has been pending for them for a long time," said a third person who also didn’t want to be identified.

Of the 10 blocks relinquished by BHP Billiton, seven were awarded under the seventh Nelp auction. BHP Billiton on its own was present in three blocks awarded under the eight auction and was also the operator for them.

The petroleum ministry warned the Prime Minister’s Office about foreign firms exiting oil and gas exploration in the country, Mint reported on 11 July 2012. As many as 73 blocks awarded in earlier auctions had encountered problems related to clearances. The government brought down the number to 10.

This development comes even as petroleum minister M. Veerappa Moily on Friday expressed confidence about investors’ participation in the next Nelp auction.

India plans to offer 86 hydrocarbon blocks under the 10th auction and focus on obtaining the various clearances needed for operating these blocks to avoid any embarrassment after the fields are awarded.

The oil ministry remained upbeat on the future.

“We will exclude the area that doesn’t have clearance and will reauction the blocks in the coming rounds," said the petroleum ministry official cited earlier.

Although India’s oil and gas sector has attracted interest from investors such as London-based BP Plc. and Vedanta Resources Plc., the operators have been concerned.

While Cairn wants a blanket approval for exploration and drilling, Mukesh Ambani-controlled Reliance Industries Ltd (RIL) has been concerned about it being blamed for a shortfall in gas supply from the KG-D6 field off the east coast and, as a consequence, a penalty being imposed on it. RIL holds a 60% stake in the deepwater field, BP holds 30% and Canada’s Niko Resources Ltd, 10%.

Nelp was approved by the government in 1997—it kicked off in January 1999—to boost hydrocarbon exploration. Under Nelp, the government allocates rights to explore hydrocarbon blocks through a bidding process and has done this in nine phases so far for 249 fields.

Apart from securing energy resources overseas, India needs an increase in domestic production to help achieve energy security.

India is the world’s fourth-largest energy-consuming nation and imports 80% of its crude oil and 25% of its natural gas requirements. It trails US, China and Russia, accounting for 4.4% of the global energy consumption.

India’s energy demand is expected to more than double by 2035, from less than 700 million tonnes of oil equivalent (mtoe) now to around 1,500 mtoe, according to the oil ministry’s estimates.

Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Updated: 21 Oct 2013, 09:33 PM IST
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