Efforts to expedite the operations in the oil and gas sector in India are on, so that India minimizes its dependence on imports. But the issue of energy security is facing hurdles from the efforts of defense ministry for India's national security.
Sources say that to sort out the issues with various oil and gas blocks stuck because of hurdles from ministry of defense (MoD), PMO principal secretary Pulok Chatterjee reviewed the situation and suggested corrective measures.
Though the international bidding round for oil and gas blocks, called as New Exploration Licensing Policy (NELP) is meant for attracting investments, somehow the efforts of oil sector have been defeated by the efforts of various wings of ministry of defense, and sources say that the fate of investment worth $12 billion is now uncertain.
NDTV learns that out of 249 oil & gas blocks allotted under nine rounds of NELP, operations in as many as 46 block are stuck because of issues raised by various wings of MoD. Officials, who did not want to be identified, said that the PMO is very concerned about the drying foreign investment in the sector and the government is very concerned about the issue of energy security of the country.
Another official said that the PMO is taking a wholesome view for India's energy security and it is not just the coal production and power crisis but the situation in the oil & gas sector is equally grim. In fact, the official highlighted the fact that before a joint secretary takes up the issue of 13 coal projects of Coal India on July 6, to sort out issues and unlock more than 100 million tonnes of coal production, on July 2 PMO's principal secretary Pulok Chatterjee himself reviewed the hurdles in the sector. Also read: Coal India gets PMO's policy push
In the PMO meeting for the sector on July 2 it was highlighted by the ministry of petroleum and natural gas (MoPNG) that non-clearance from MoD will affect future investments and at later stage may lead to lot of litigations. Not just that, officials say that the biggest concern MoPNG highlighted in the meeting with PMO is the fact is about the “exodus of foreign companies”.
Analysts who follow the sector say that the exploration business is anyway a high-risk business with huge uncertainty and only 10-20 per cent success rate. And in this context if 20% of the blocks (46 blocks out of about 240 or so) are taken away than obviously it translates into a big disappointment. Especially when the industry is right now concerned about some of the most prolific areas where the chances of getting oil and gas is very high (see table below).
| Oil & gas blocks: thumbs down from the defense ministry | |
| Basin | No. of blocks |
| KG basin | 23 |
| Mumbai and Gujarat | 8 |
| Mahanadi basin | 9 |
| Andaman basin | 2 |
| Cauvery basin | 4 |
And the objections from the MoD is hurting all the companies equally, either private or PSU, either domestic or foreign (see table below).
| All firms equally hit | ||
| Company | No. of blocks | Foreign connection |
| ONGC | 18 | Mittal investment in one block |
| RIL | 17 | BP has a 30 per cent stake in RIL blocks; Niko and others too have stake |
| BHP Billiton | 5 | Foreign investment |
| Cairn | 3 | Foreign investment |
| Santos | 2 | Foreign investment |
Amidst all the delays in the oil and gas sector, MoD too has a valid point to make. A senior MoD official, who is not authorized to speak to the media, says that areas like Machilipatnam on the east coast is the proposed site for new missile testing range. And this area can't be compromised for any other activity. Similarly, a big area near the BHP Billiton block near Saurashtra falls under naval exercise zone.
The MoD official adds that clearances for as many as 28 blocks were granted by the ministry as there was enough scope. So the official adds that blaming MoD for all the delays is wrong. But some of the critical areas such as Machilipatnam and Saurashtra can't be compromised. So the MoD is adamant on not compromising these areas as these are integral part of India's energy security and so the petroleum ministry should have done the due diligence properly.
Sources say the PMO in the meeting on Monday took a balanced call and suggested that a one-time pre-auction comprehensive clearance from all government agencies should be implemented. The PMO had already formed an inter-ministerial group to sort out the issues, which will look, not just the clearance from MoD but from all agencies like home ministry, ministry of environment and forest etc.
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