CCI gives 30 days to get oil blocks out of MoD fire

Written by fe Bureau | New Delhi | Updated: Jan 31 2013, 09:36am hrs
The Cabinet Committee on Investment (CCI) on Tuesday asked the oil and defence ministries to sort out the issues concerning pending defence clearances for several oil and gas blocks and report back to the committee within a month. After the first meeting of the newly set up panel headed by the Prime Minister to fast-track big infrastructure projects, information and broadcasting minister Manish Tewari told reporters that the panel discussed oil & gas projects extensively and fruitfully and a holistic overview was taken to expedite clearances.

Oil and gas projects worth $13.5 billion are facing hurdles for security concerns, as several blocks including Reliance Industries' producing KG-D6 gas fields, where it is struggling to ramp up output, fall within the no-go area of the defence ministry.

It is learnt that the defence ministry had earlier agreed to give clearance to seven offshore oil and gas blocks that were previously classified as no-go areas, giving much-needed relief to energy majors BHP Billiton, Cairn India and state-owned ONGC in pursuing their hydrocarbon hunt in sensitive Indian waters. The clearance came with the rider that these areas should be made available for naval exercises and firings with a week's notice. The RIL-owned D6 block in the Krishna-Godavari basin, however, continues to be a no-go area as it is close to a strategic naval base that was approved in 2008, eight years after the block was licensed to RIL.

If the CCI directive is complied with by the oil and defence ministries, it would benefit several projects of ONGC, GSPC and Cairn Energy, besides RIL. Seven of the no-go area blocks are on the east coast. When asked what project was cleared by the panel, Tewari said the CCI was an architecture the government had put in place to expedite clearances, although there could not be one size fits all solution to various projects.

Out of the seven blocks that got the defence ministry's clearance, four were assigned in the Mumbai offshore region to a 26:74 consortium of BHP Billiton Petroleum and GVK Oil and Gas. One block belongs to Cairn India awarded to it in the eighth round of licensing. BHP has full development and production rights on two other blocks in the Mumbai offshore region, while a 90:10 consortium of ONGC and Oil India have production rights over a block in the Andaman-Nicobar basin.

The ministry has said these companies have to take approval for building any permanent structure after the exploration and that fresh security clearance is required for the different kinds of vessels used in survey, exploration and production, sources privy to the development said. The ministry also said that another seven blocks that were also classified as no-go areas would continue to be so.

The roadblock on exploration activities had adversely affected investor interest in India's recent auctioning of oil and gas blocks. It also came in the way of India's efforts to reduce import dependence on crude oil and natural gas. India imports about 70% of its crude oil requirement and close to a fourth of the natural gas consumed in the country. The energy crisis that is gripping Asia's third-largest economy also casts serious doubts about its ambition to double the share of manufacturing output in its gross domestic product to 32% by 2020.