With over Rs 80,000 crore of investment in oil and gas hunt stuck for want of defence nod, Oil Minister M Veerappa Moily today said the ice has been broken on getting clearance for 39 offshore areas including Reliance Industries' already producing oil and gas fields.
Defence Ministry has declared 7 blocks including Reliance Industries's KG-D6 which has been in production since September 2008 and its gas discovery block NEC-25 for reasons like overlapping with proposed Naval base or being close to missile launching and Air Force exercise area.
"We have broken the ice. I don't think you can say (log jam continues)... oil and gas activities and defence strategies can co-exist," Moily told reporters when asked about the outcome of the first meeting of the Cabinet Committee on Investment (CCI).
He said the defence ministry has classified seven blocks as "No-Go" areas for oil and gas exploration and production activities and has imposed stringent conditions for another 32.
The CCI in its meeting on Wednesday asked the Ministry of Defence and Moily's ministry to sort out differences over the seven block in one month and for the 32 areas in three months.
"I dont think there will be a problem. We will sort it out. This (defence clearance to the 39 blocks) will open up Rs 80,000 crore of investment (and) open up a big gateway of investment in petroleum sector," he said.
Moily said oil and gas exploration and defence activities can co-exist as was the practice in several countries, including the United States.
"They (Defence Ministry) have a concern, which we are also concerned about. National security is important (but) at the same time oil and gas exploration and development is also necessary," he said. "When countries are after countries are going ahead, why can't India."
Moily said more than USD 14-15 billion investment has already been made in blocks like KG-D6 which has been producing oil since September 2008 and natural gas since April 2009.
"Enough technology is available where exploration can co-exist with defence strategies," he said, adding oil and gas production does not require thousands of kilometres of area.
While companies are allotted large areas for finding hydrocarbons, actual area used for production is only 4-5 per cent and the rest of it is relinquished, he said. The CCI, which was constituted to expedite the clearance for infrastructure projects of Rs 1,000 crore or more, on Wednesday 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 (Reliance Industries's gas discovery area of NEC-25) as "No-Go" areas and putting stringent conditions on 32 other blocks.
"The issue was discussed threadbare," Moily said the CCI has asked the two ministries to sit together and resolve the issue.
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, bringing down the number of blocks awaiting clearances from 47 to 39.
Sources said companies like Reliance Industries had already invested close to USD 16 billion in the 39 blocks since 2000 after getting approval from the Defence Ministry at every 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.
Blocks like KG-D6 were awarded to companies since 2000 by the Cabinet after clearance from all ministries concerned including the Ministry of Defence.
The reason for classifying the Krishna Godavari basin block KG-D6, where UK's BP Plc has 30 per cent interest, as 'No-Go' area is that it overlaps with a proposed Naval base.
Reliance Industries-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 "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.