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BHP Billiton to back away from India exploration projects

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Global natural resources group BHP Billiton has outlined plans to exit a series of Indian oil and gas explorations projects after being hit by lengthy regulatory delays relating to India's ministry of defense.

The company said it would relinquish nine exploration blocks awarded between 2008 and 2010 under India's new exploration licensing policy, the rules by which potential hydrocarbon resources are developed in Asia's third-largest economy.

(Read more: Wal-Mart's India departure, a sign of things to come?)

The decision reduces BHP's presence in India's fast-growing energy market, leaving the Anglo-Australian company with an interest in just one exploration block, which it said it will continue to develop with UK-based BG Group.

BHP's move is especially significant for India's oil and gas sector, where the government has attempted to attract greater foreign investment to increase domestic production and cut oil imports as it attempts to meet a steep rise in energy demand in coming decades.

The pullout makes BHP the latest in a series of large global companies to scale back or end their operations in India in the face of bureaucratic delays or disagreements with the nation's government.

This month Walmart, the world's largest retailer by sales, abandoned its Indian joint venture following complaints about overly restrictive regulations on foreign investment.

In July, Posco of South Korea confirmed plans to scrap a $5.3 billion steel mill project following regulatory problems, while in the same month Luxembourg-based steelmaker ArcelorMittal ditched plans to plan build a second major steel plant in eastern India, citing similar complaints.

(Read more: Raghuram Rajan: India's deficit is under control)

BHP said: "The decision to relinquish these blocks is the result of an exploration portfolio review and the inability to carry out exploration operations."

It did not specify the reason for its exploration difficulties, but six of the relinquished blocks were awarded to the group as part of a 26 percent stake it holds in a joint venture with GVK, an Indian infrastructure and energy-focused conglomerate.

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In its most recent annual report, GVK admitted that "further exploration has hit a roadblock" in the blocks it co-owns with BHP, relating to clearances that had not been provided by India's ministry of defense, which had led the group to suspend investment.

"The management . . . after careful consideration of the process and time being taken by the authorities for clearances is of the firm view to wait and watch, before infusing any further funds into this project," GVK said.

News of BHP's difficulties, first reported by Mint, an Indian business newspaper, follows similar difficulties with defense department regulations faced by India's Reliance Industries relating to the large gasfield off India's eastern coast that it co-owns with UK-based oil group BP.

"India is significantly dependent on foreign oil and the government wants to enhance interest from foreign players to produce more here," said Arvind Mahajan, head of energy at KPMG India. "But clearly there are delays happening, even though the government says it is working overtime to try and address them."

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