Clearing the last hurdle, the Home Ministry has given unconditional approval for UK’s BP to buy a 30 per cent stake in Reliance Industries’ oil and gas blocks, including the showcase KG-D6 gas fields, for USD 7.2 billion.

The Ministry of Home Affairs wrote a one-page letter to the Petroleum Ministry on 1st June giving security clearance and a no-objection certificate for BP buying a 30 per cent stake in 23 oil and gas blocks of Reliance in India’s largest foreign direct investment, a top Oil Ministry official said in New Delhi.

While the NOC to the Reliance-BP deal is unconditional, the Home Ministry asked if Reliance could not have offered the stake to state-owned gas utility GAIL India or any other PSU.

“Our PSUs do not have the expertise Reliance has been looking for. It wanted an expert in deepsea technology and GAIL, which is a gas marketing and transportation company, hardly fits the description,” he said.

Reliance wants to leverage the worldwide experience of Europe’s second biggest energy company to resolve sub-surface technical issues at its KG-D6 gas fields, where production has fallen from 61.5 million standard cubic metres per day to about 48 mmscmd, instead of rising to the planned 69 mmscmd.

The Mukesh Ambani-led firm hopes BP would be able to fix reservoir issues at the Dhirubhai-1 and 3 gas fields in the KG-D6 block to rapidly raise output to the planned peak of 80 mmscmd and also help in formulating viable plans to bring to production other finds in the block and in other areas.

Industry observers scoffed at the idea of Reliance first offering the stake to firms like GAIL and asked whether the Home Ministry would suggest the same to Cairn Energy, which is selling its Indian unit to London-listed mining group Vedanta Resources.

State-owned Oil and Natural Gas Corp (ONGC) is already a 30 per cent partner in Cairn India’s mainstay Rajasthan block and could easily takeover Cairn Energy shares.

They questioned the Oil Ministry’s rationale of seeking security clearance for BP when the company is already operating oil and gas blocks in the country, has a huge lubricant business and a flourishing solar venture with Tata.

ONGC, the nation’s largest state explorer, is in fact struggling to put together a viable development plan for discoveries it has made in a block adjacent to KG-D6 in the Krishna-Godavari basin.

ONGC itself has been seeking partners for that block and had shortlisted BP as a potential ally.

The official said the Home Ministry has also asked if oil and gas can be exported.

“That is ridiculous to even think. Production Sharing Contract (PSC) bars export of oil and the Supreme Court has upheld the government’s absolute powers to decide users of natural gas. So while India is energy deficit, no government can even think of exporting gas.”

“There is no way that BP can take oil and gas produced from Reliance blocks to the UK,” he added.