BHP Billiton Ltd (BHP) Monday said it is exiting most of its oil
and gas investments in India because it can't carry out exploration
activity.
The move marks a blow to the Indian government's efforts to
attract foreign investment and wean itself off energy imports.
The Anglo-Australian natural resources company didn't say why it
wasn't able to carry out exploration on the nine blocks, or
exploration areas, it has relinquished, but local media cited
growing frustration in securing necessary approvals to carry out
exploration.
BHP confirmed that it has given up six blocks where it owned a
26% interest--with India-based GVK Power & Infrastructure Ltd.
(532708.BY) holding 74%--and three blocks that it fully owned. All
were awarded to the company between 2008 and 2010. BHP will keep
its 50% interest in a block which is operated by U.K.-based oil
major BG Group PLC (BRGYY), where it is awaiting seismic survey
data.
"The decision to relinquish these blocks is the result of an
exploration portfolio review and the inability to carry out
exploration operations in these blocks," a BHP spokeswoman said in
an emailed statement.
Partner GVK echoed similar views when it said earlier this year
that it had suspended further investment in their jointly owned
blocks because of continued delays in securing necessary clearances
from India's ministry of defense.
BHP's pull-out presents a setback for the Indian government,
which wants to attract and retain big-ticket investment in its
industrial and natural resources sectors. Other companies have also
been exiting their investments due to bureaucratric hurdles.
Earlier this year South Korean steelmaker POSCO (005490.SE) and
Luxembourg-based steelmaker ArcelorMittal's (MT) also decided to
withdraw from some of their Indian projects, citing bureaucratic
hurdles in acquiring land and getting licenses to mine raw
materials for their projects.
The pull-out is also a blow to the Indian government's ambitions
to bolster domestic oil and gas production through foreign
investment in the country. The Indian government wants to grow
domestic oil and gas production in order to wean the country off
energy imports, which currently account for about three quarters of
India's annual energy needs.
BHP's pull-out "is bad news," said S.C. Sharma, a petroleum
specialist at the Indian government's Planning Commission
think-tank.
"India needs investment in the oil and gas sector to cut its
energy import bill. (And) BHP is a good company," he added.
India imported crude oil worth $145 billion in the financial
year ending March 31. The government hopes to shave $20 billion in
import costs this year via Iranian crude oil imports and more
efficient use of oil domestically.
Write to Alex MacDonald at alex.macdonald@wsj.com and Saurabh
Chaturvedi at saurabh.chaturvedi@wsj.com
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