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Economy Jan 31, 2013

Investment panel fails to break logjam over stuck oil, gas projects

The first meeting of the newly formed Cabinet Committee on Investment failed to break the logjam over defence clearances to oil and gas activities in 39 offshore areas, including Reliance Industries' producing KG-D6 fields.

The CCI headed by Prime Minister Manmohan Singh asked the ministries of petroleum and defence to sort out differences on allowing exploration and production particularly in Krishna Godavari basin.

The CCI, which was constituted to expedite the clearance for infrastructure projects of Rs 1,000 crore or more, took up the issue of defence ministry declaring 6 blocks in KG basin including KG-D6 producing fields and one in NEC or North East Coast region (RIL's gas discovery area of NEC-25) as "No-Go" areas and putting stringent conditions on 32 other blocks.

the panel has been vested with overarching powers to clear investment bottlenecks. It had been set up in December to fast-track clearances for projects costing more than Rs 1,000 crore

The panel has been vested with overarching powers to clear investment bottlenecks. It had been set up in December to fast-track clearances for projects costing more than Rs 1,000 crore

"There were certain areas where certain problems were identified and therefore the Ministry of Petroleum and Natural Gas has been tasked with responsibility of sitting down with the Ministry of Defence and resolving some of the problems which are there with regard to 39 blocks," I&B Minister Manish Tewari told reporters after a nearly 100 minute long meeting.

He said specific timelines have been fixed and both ministries have been asked to come back to CCI within one month.

Originally, the Defence Ministry had declared 14 blocks as "No-Go" areas as they over-lapped or were close to proposed Naval base or missile launching range/air force exercise area. But the Defence Ministry later relented and agreed for exploration to be permitted in 7 blocks in Mahanadi basin. One more block which had previously objected to by the Commerce Ministry too had been cleared.

Specific timelines have been fixed. Both ministries have been asked to come back to CCI within one months time. Over the next one month you will have concrete and positive movement," Tewari said.

He said there was in-depth briefing of the issues and officials concerned led the ministers through the various milestones which have been achieved and they delineated the problems which need to be resolved.

Sources said the CCI was told that companies like RIL had already invested close to $16 billion in the 39 blocks since 2000 after getting approval from the Defence Ministry at stage - first for beginning seismic survey, then for drilling wells and then for constructing permanent oil and gas facilities.

Oil Ministry officials insisted that Defence Ministry cannot withdraw the clearance after 12 years of exploration. KG-D6, which was awarded to RIL in 2000 by the Cabinet after clearance from all ministries concerned, has been producing oil since September 2008 and gas from April 1, 2009. The reason for classifying the Krishna Godavari basin block, where UK's BP Plc has 30 per cent interest, as 'No-Go' area is that it overlaps with a proposed Naval base. RIL-BP's NEC block NEC-OSN-97/2 where sizable gas discoveries have been made, also has been classified as "No-Go" area as it is close to missile launching range/air force exercise area.

Sources said the other 7 "No-Go" blocks are with ONGC and reasons cited for withdrawing clearance include being close to missile launching range, overlapping with proposed Naval base, overlapping with Naval firing range and Air Force exercise area.

Besides the 7 "No-Go" blocks, the defence ministry has imposed stringent conditions in respect of 32 exploration blocks. Sources said the stringent conditions imposed include companies not locating any pipelines or structures on sea surface in the blocks cleared for exploration and production activities.

The Oil Ministry feels that non-clearance of the blocks would lead to exodus of foreign companies who were brought with assurance of conducive investment environment and would lead to loss of credibility for the government besides
adversely impacting investment climate and litigations. It sought CCI's approval for relaxation of stringent conditions in respect of 32 exploration blocks and clearance of 7 "No-Go" blocks.

PTI

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