In an attempt to play safe, the ministry of petroleum and natural gas may seek the approval of the Cabinet Committee on Economic Affairs (CCEA) for a $7.2-billion deal between Reliance Industries (RIL) and BP. This despite the fact that a “deemed consent” could be in place already.
RIL had on February 25 sought the government’s approval for selling 30 per cent interest in 23 oil and gas blocks, including the prolific D6 field, to BP.
Article 28.6 of the production sharing contract for the D6 field says: “In the event the government does not give consent or does not respond to a request for assignment or transfer by a party comprising the contractor within 120 days” of such request and receipt of all specified information, the government consent would be deemed to have been given.
The ministry has circulated a note recommending that the deal be approved. “CCEA may take up the issue next week. Technically, the ministry has the competence to approve the deal, but it is a big-ticket investment,” said a senior oil ministry official.
A senior RIL executive said the company would not like to proceed with a deemed approval as a written approval would have more legal strength.
“A deemed approval implies that no written approval is required from the relevant authority and the company can assume that the approval has been granted.
But in cases where stakes are high, a company would be keen on a written approval to avoid hurdles later,” said Rajesh Thakkar, partner, MZS & Associates. The RIL executive, who did not want to be named, said the company gave the government all clarifications related to financial and legal details of the deal within a few days of the application.
“There can be different interpretations of whether 120 days are counted from the day of the application or the clarification,” said the executive.
BP, looking to enter India’s exploration and production business through this deal, remains unperturbed by the delay and the controversy surrounding the draft report of the Comptroller and Auditor General of India on RIL blocks. Though an RIL spokesperson did not respond to emails, a BP spokesperson said the company was awaiting the government’s approval. “BP is keen to be a long-term partner with Reliance and more importantly with India to explore and develop these blocks to help develop a gas-based economy in an efficient manner. Through this alliance, BP will get a material and immediate footprint in one of the fastest-growing gas markets in the world.”
Barring the Cairn-Vedanta deal, which involved sale of a controlling stake in Cairn India and not just a change of interest in particular oil and gas blocks, no request for change of a participating interest has ever gone to the Cabinet.
RIL itself had got approvals for buying participating interest from Hardy Oil and Niko in blocks allotted under the New Exploration and Licensing Policy from the petroleum ministry.
