Foreign oil firms that gave up blocks may escape fine

BHP Billiton, Santos, BP and Eni are among the explorers unable to meet their work commitments due to lack of clearance by the Ministry of Defence

The Ministry of Petroleum & Natural Gas (MoPNG) might clear relinquishment requests for 13 blocks held by overseas hydrocarbon majors such as BHP Billiton, Santos, BP and Eni, by exonerating the companies from paying a penalty for not meeting the minimum work programme (MWP) obligations.

All these companies were unable to meet their work commitments due to lack of clearance by the Ministry of Defence (MoD), despite the blocks being awarded to them through auctioning under the New Exploration and Licence Policy (Nelp). Last year, the hydrocarbon regulator had written to some of these operators asking them to pay the amounts towards unfinished MWP with interests before relinquishment according to the production-sharing contracts.

In the wake of the proposed relinquishment, the bank guarantee for these blocks that got expired on March 31, 2014, is also unlikely to be renewed and might be left off the hook without paying any penalty. According to an official source close to the development, the Directorate-General of Hydrocarbons (DGH) had recently given its consent to the move by stating the decision by MoPNG on request of contractors for exonerating from unfinished MWP obligations may be conveyed.

As far as Santos is concerned, access was denied to one of its blocks on a boundary dispute with Bangladesh and MoD not allowing it to carry out operations. On the other hand, Eni’s bank guarantee of $780,220 that also ended in March had a claim period till May.

Debasish Mishra, senior director at Deloitte in India, said, “Government should have gone ahead with the bidding after taking the clearances. As far as India is concerned, sentiment is already quite negative. People are concerned with the regulatory environment. Before the next round of Nelp, there should be clarity on whether they are going ahead with revenue-sharing or a production-sharing model. The new government should set the policy right.”

The 10th round of Nelp was showcased in January as part of MoPNG’s flagship event, Petrotech. However, the Planning Commission had asked for it to be put on hold, as the ministry could not finalise whether to go ahead with a revenue-sharing or profit-sharing model. The blocks come under Mumbai, Bay of Bengal, Andaman Nicobar and also Krishna Godavari basins.