The Hindu Business Line : ONGC approaches Ministry on cost recovery

Unfinished work
DGH recommended cost recovery on ONGC and Reliance Industries for default on commitments made by them on oil and gas exploration blocks awarded under NELP.
It recommended a total cost recovery of $107.391 million on ONGC and $26.535 million on RIL for unfinished work programme committed on the blocks awarded to them under the NELP.

New Delhi , Sept. 22

ONGC has knocked at the doors of the Petroleum Ministry to resolve the issue of cost recovery proposed by the Directorate-General of Hydrocarbons (DGH) on the state-owned major for default on commitments by the company on oil and gas exploration blocks awarded under the New Exploration Licensing Policy (NELP).

Company sources told Business Line that ONGC has written to the Ministry stating that it should either be allowed to invest the unused amount for fulfilling the work programme committed on the blocks in research and development activities or given a year's extension to finish the same, as prescribed under the production sharing contract (PSC). The Petroleum Ministry is yet to firm up its views on the issue.

The company in a recent communication to the DGH is understood to have said that it was ready to accept the extension policy, which gave a maximum of 18 months extension to any contactor. ONGC has given another option stating that there is clause in PSC, which stipulates that if the block has no prospect, it can be permitted to use the remaining work programme with some other exploration work as decided by DGH. The upstream technical regulator DGH has recently recommended cost recovery on ONGC and Reliance Industries Ltd for default on commitments made by them on oil and gas exploration blocks awarded under NELP.

The DGH has recommended a total cost recovery of $107.391 million on ONGC and $26.535 million on RIL for unfinished work programme committed on the blocks awarded to them under the NELP.

Sources said ONGC was asked to shell out the cost for not meeting the minimum work commitment in six blocks.

The cost recovery for unfinished work programmes were calculated based on the cost given by the company and cost of similar activity in surrounding areas, sources said.

The DGH had also sought the comments of the two companies on the estimates it made. ONGC has said that most of the wells coming under the unfinished work programme were in deep waters; hence water depth may be removed while calculating the cost of drilling per metre.