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Fearing that exit of global energy majors may hit the January auction of oil and gas blocks, the Oil Ministry is desperately trying to dissuade BHP Billiton from exiting by offering partnership with state-owned ONGC.
BHP Billiton Ltd, the world's largest miner, in October said it has exited nine out of its 10 oil and gas exploration projects in India as it could not start operations for want of defence approval.
Also, Australia's Santos wants to exit its two exploration blocks in Bay of Bengal as it hasn't been able to start work due to maritime boundary dispute with Bangladesh and defence restrictions.
Aranane Giridhar, Joint Secretary (Exploration) in the Oil Ministry said the government is trying to convince BHP to stay invested in the country and it will try to remove impediments.
"BHP left country not because of Oil Ministry. It left because of sacrosanct defence establishments that have to be protected. Santos left because of maritime dispute with Bangladesh not because of Oil Ministry," Giridhar said.
"We are talking to them... We are trying to work out something that we can give them," he told reporters on the sidelines of the 12th Petro-India 2013 conference here.
One option being mulled is to allow Oil and Natural Gas Corp (ONGC) to buy a majority stake in the blocks and let the state-owned firm take over the job of getting the approvals, he said.
"The idea is that they (BHP) retain 20 or 25% stake in the blocks," he said.
BHP has given a notice for relinquishing nine exploration blocks it was awarded between 2008 and 2010 under the New Exploration and Licensing Policy (NELP) after it failed to secure clearance from the Defence Ministry.
It wants to exit the 6 Mumbai basin blocks it was awarded with GVK in the seventh round of NELP in 2008 and three blocks areas it had won in NELP-VIII round.
Giridhar said the defence ministry hasn't put a "no-go" restriction on the blocks but has only told BHP that it should come to it before building a permanent structure in the offshore.
Asked if the Defence Ministry could at that stage deny permission for putting any structure to aid production of oil and gas, he said, "that won't be."
For a sector already grappling with regulatory issues and lack of pricing and marketing freedom, pullout by BHP and Santos ahead of the 10th round of NELP may be bad news for Oil Ministry's effort to attract foreign investors to boost domestic production.
The Oil Ministry is looking at offering as many as 86 blocks or areas for exploration of oil and gas in the 10th round of NELP.
This will be the largest offering of blocks since the advent of NELP in 1999.
Santos, Australia's third-largest oil and gas producer, which was in February 2007 awarded two blocks in south-east of Kolkata, has written to the government saying it has not been able to carry out exploration in the area because of defence restrictions and maritime boundary dispute with Bangladesh.
It offered to surrender the blocks NEC-DWN-2004/1 and NEC-DWN-2004/2 on which it has already spent $60 million.
Oil Secretary Vivek Rae said Santos has informed the ministry about its intent to exit the blocks won in the 6th round of NELP.
The pullouts by BHP and Santos is the latest in a series of large companies scaling back or ending operations in India over regulatory delays.
South Korea's Posco had in July scrapped a $5.3 billion steel mill project while in the same month Luxembourg-based steelmaker ArcelorMittal dropped plans to build a second major steel plant in Odisha.
