BHP Billiton Pulls Out of India, Who Then Considers Policy Tweak

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This is like bolting the stable doors after the horses have bolted. India’s Oil Ministry has now said it would start working out ways of relaxing some of the “rigid provisions” in oil and gas contracts to safeguard energy explorers’ interests.

Coming on the heels of two foreign companies – the Anglo-Australian BHP Billiton and the Italian Eni – that recently were threatening to walk out of India, citing delays in getting mining permits as well as other procedural delays, the Indian government hopes a re-work of the contracts would resolve matters.

A report in The Economic Times said the petroleum ministry had proposed that in “sensitive cases” where exploration was in a defense or high security zone, explorers would retain the option to exit from the entire block without any financial liability, or their physical and financial commitments would be reduced in proportion to the remaining block area.

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Last week, BHP Billiton, one of the world’s biggest miners, had announced it was making its exit from most of its Indian oil and gas projects. While the Anglo-Australian major had not said why, according to local media, it was because of a major delay in exploration permission.

Officially, BHP had said the decision to relinquish the nine blocks was a result of an exploration portfolio review. But off the record, as reported in the press in India, BHP’s operations in the country were often blocked by delays in permits from India’s defense ministry. India, incidentally, is the world’s fourth largest fuel importer.

Eni’s senior Vice President Luigi Ciarrocchi had, in a note to Indian oil secretary Vivek Rae, said his company was planning to “proportionately reduce their contractual commitments in an Andaman block after the department of space restricted the company’s access to a large part of the contract area.” In the June 2013 letter, the senior official had also proposed that Eni would retain a minor portion of the block provided it would get “unrestricted accessibility” to the reduced area.

In 2010 Norway’s Statoil and Brazil’s Petrobras had refrained from joining exploration blocks operated by ONGC, again for not getting the necessary approvals on time.

There was time when over five dozens blocks had faced regulatory hurdles following objections raised by the environment, space, and defense departments. Many had been resolved, some even by the prime minister’s Cabinet Committee on Investment. The proposed policy tweak is expected to sort out the rest.

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