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FCPA Blog Daily News

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Thursday
Oct242013

BHP Billiton quits India oil and gas sector 

BHP Billiton said it will pull out of nearly all of its India oil and gas projects. The world's biggest mining company didn’t give a reason but local reports cited delays in getting exploration permits.

BHP, based in Sydney, Australia, may abandon all nine oil and gas exploration blocks it holds in India, Reuter’s said.

India ranks a dismal 132nd on the World Bank's Doing Business Index. It measures red tape and the costs and time needed to deal with it.

The presence of a lot of red tape signals opportunities for graft. As the World Bank has said, ‘Cumbersome entry procedures are associated with more corruption, particularly in developing countries. Each procedure is a point of contact—an opportunity to extract a bribe.’

BHP hasn't mentioned graft in its decision to depart India's oil and gas segment.

The World Bank has also said red tape doesn't contribute anything to health and safety or better environmental practices:

Analysis shows that burdensome entry regulations do not increase the quality of products, make work safer or reduce pollution. Instead, they constrain private investment; push more people into the informal economy; increase consumer prices; and fuel corruption.’

This week BHP said its ‘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,.’

India is the world’s fourth largest fuel importer and its currency is losing value, mainly because of the money spent important oil.

BHP's decision is bad news for the India government, which is looking for foreign investment in the oil and gas sector, among others.

“This is a sad story for India’s E&P (exploration and production) sector. Sentiments are already negative and the exit of BHP Billiton is going to do more harm,” added R.S. Sharma, former chairman of state-run Oil and Natural Gas Corp.

BHP stopped all mining activity in Cambodia after NGO reports alleged it had paid $3.5 million to Cambodian officials.

The company appears on our Corporate Investigations List.

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Richard L. Cassin is the Publisher and Editor of the FCPA Blog. He can be contacted here.