The Petroleum Ministry is not in favour of using the special purpose vehicle (SPV) route to secure prior clearances before the bidding for oil and gas exploration blocks. It feels the Directorate-General of Hydrocarbons (DGH) is well-suited for the job, better than any SPV, sources said.

The proposal to create a SPV in line with the Ultra Mega Power Projects (UMPP) policy was suggested by the Prime Minister’s Office.

Procedural delays result in the contractors missing deadlines committed under the production sharing contracts (PSC). And if a contractor is unable to complete work within the timeline, he has to pay penalty.

Under the production sharing contract regime (New Exploration Licensing Policy), exploration and development activities in 80 blocks (onland and offshore) were affected due to non-availability of clearances from various agencies.

The investments by the contractors in the affected blocks stood at around $13.5 billion as on March 31, 2011.

The PMO’s move was aimed at cutting down the time lost by winners of blocks under the NELP in getting statutory clearances from multiple agencies, such as Defence, Environment and Forest, Department of Space, and the State Governments.

According to the UMPP policy, Power Finance Corporation Ltd forms the SPV to build, own, and operate the power units. Once the project is awarded, it is transferred to the winner.

The Petroleum Ministry is understood to have opined that the DGH has been set up mainly to facilitate in technological and statutory issues. Clearances for all the blocks up to VIII licensing rounds were obtained smoothly by the DGH.

“Recent delays in clearances were only due to objections raised by the Navy and the Department of Space for several offshore blocks. While the Department of Space has given conditional clearances for almost all the blocks, the Navy is yet to clear several blocks along the sea coast,” the Ministry said.

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