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BP says subsidies, bottlenecks hurt India investment prospects

BP Plc, the largest foreign investor in India's energy sector, on Thursday said a non-conducive business environment and subsidies have diluted the country's attractiveness to investors.

twitter-logoPTI | January 9, 2014 | Updated 16:47 IST

BP Plc, the largest foreign investor in India's energy sector, on Thursday said a non-conducive business environment and subsidies have diluted the country's attractiveness for investors.

BP India head Sashi Mukundan said India will become the third-largest economy by 2030, after the US and China, and demand for energy will triple, presenting huge investment opportunities.

"However, these opportunities are accompanied by several challenges. A non-conducive business environment, lack of adequate infrastructure, project bottlenecks, and significant energy-related subsidies-all have distorted and diluted the overall attractiveness of the sector," he said at a Petrotech pre-conference in New Delhi.

While Mukundan did not elaborate, the comments come days ahead of the unveiling of the country's second-largest auction of oil and gas exploration blocks , which oil minister M Veerappa Moily expects will attract foreign investment to revive the country's almost stagnant oil and gas hunt.

BP, which invested $7.2 billion to buy a 30 per cent stake in several oil and gas blocks of Reliance Industries , faced numerous delays in getting routine regulatory approvals.

Its attempts to reverse fortunes at the flagging eastern offshore KG-D6 field were frustrated by these delays.

Also, with gas prices currently one-fourth the cost of importing the fuel, several projects remained economically unviable.

"If we are to be the third-largest economy, then we need to start behaving like one. We cannot afford to not do things at scale or not explore all options to satisfy growing energy demand. It will also be more painful to do it all alone," Mukundan said.

He said there was an urgent need to reset the context and think out of the box to realise the true potential of India's hydrocarbon sector.

"BP has been in strategic partnerships across the world for more than a hundred years, helping transform companies, the sector and economies of many countries and we therefore believe that we can contribute to deciphering the Indian context," he said.

The Indian hydrocarbons sector, Mukundan said, is a unique mix of opportunities and challenges.

"We are currently at a critical crossroads. There are significant opportunities waiting to be tapped across the oil and gas value chain - vast unexplored basins, significant planned investments in storage, pipeline, import, transmission and distribution infrastructure, and substantial enhancement of refining and petrochemical capacities by both the public and private players," he said.

The BP India head said as India becomes the third-largest economy, its energy demand is expected to accelerate significantly and triple by 2030, making the country a key global economic power and a significant hydrocarbon player.

"It will require an unprecedented scale and scope of activities in the hydrocarbon sector to meet this demand while keeping the Indian industry competitive, and as a result, the Indian economy vibrant and growing. Energy is the fuel for this," Mukundan said.

"It is important for the government and the industry to work together as strategic partners to bring about energy security and competitive growth," he added.

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