BHP Billiton (BHP.AX) is walking away from almost all of its oil and gas interests in India, citing an inability to carry out exploration operations there and dealing the latest setback to the country in its efforts to draw foreign investments.
The Anglo-Australian resources company would not confirm the reason for its decision to relinquish its interest in nine oil and gas exploration blocks in India, but local media reported it is withdrawing because of delays in clearances.
BHP (BLT.L) had earlier said it was facing delays in receiving permits from India's defence ministry to conduct necessary exploration activities.
The pullback comes as India has been looking to attract foreign investment to bolster flagging economic growth and ahead of a likely fresh round of energy block auctions in January, which the government hopes will attract foreign energy firms.
"This is a sad story for India's E&P (exploration and production) sector. Sentiments are already negative and exit of BHP Billiton is going to do more harm," said R.S. Sharma, former chairman of state-run Oil and Natural Gas Corp (ONGC.NS).
In 2010 Norway's Statoil (STL.OL) and Brazil's Petrobras (PETR4.SA) decided against joining blocks operated by ONGC after showing initial interest as they could not get necessary approvals on time.
"They did not come on board because of such apprehensions and delays in getting approvals," Sharma, who was the ONGC chairman then, told Reuters on Monday.
India, beset by energy shortages that make power cuts common and fetter industrial growth, is the world's fourth-biggest importer of fuel.
It has tried to attract foreign investment in the oil and gas sector to boost stagnant domestic output but global majors have tended to take a pass on opportunities due to a perceived lack of clarity in policy and bureaucratic hurdles.
In recent years, the only major foreign investments into the sector have been London-listed Vedanta Resources' (VED.L) acquisition of a controlling stake in explorer Cairn India (CAIL.NS) and BP's (BP.L) $7.2 billion deal to buy 30 percent stake in some blocks operated by Reliance Industries (RELI.NS).
Exploration efforts, however, have so far brought little in the way of major finds partly because of the delays over permissions but also in some areas because of geological factors.
Some global companies, frustrated by bureaucratic hurdles, have been scaling back their presence in India. Earlier this year, South Korea's POSCO (005490.KS) said it would pull out of a $5.3 billion steel project, while retail giant Wal-Mart Stores Inc (WMT.N), which has complained about restrictive investment rules, recently ended a joint venture in the country.
BHP will give up its interest in six blocks in which it held 26 percent interest and local company GVK (GVKP.NS) held 74 percent, as well as three blocks in which it held 100 percent interest. It had acquired interests in the blocks between 2008 and 2010.
"The decision to relinquish these blocks is the result of an exploration portfolio review ... there have been regular discussions and communications over the last 12 months with the Ministry of Petroleum and Natural Gas," BHP said in a statement on Monday.
BHP Billiton will keep its 50 percent interest in one block, operated by BG Group (BG.L).