The Hindu Business Line : ONGC sorts out differences with Essar-Premier consortium

Clearing the air
ONGC has entered into an initial memorandum of association with the consortium.
Essar Oil official feels the memorandum would lead to the signing of product-sharing contract.
The field is located in 45-50 metre of water depth and includes proven blocks.

Kolkata , Jan. 3

The state run ONGC has buried its differences with Essar Oil and agreed to sign the product sharing contract (PSC) for the Ratna-R-series deepwater offshore oilfields. This will clear hurdles before the operator Essar Oil to develop the oilfield with an initial proven in-place reserve of 500 million barrels.

Located about 90 km south west of Mumbai in the prolific Mumbai offshore basin, the "development field" was discovered by ONGC in 1994 and was awarded to Essar Oil (50 per cent) — Premier Oil of UK (10 per cent) consortium in 1996. ONGC is a "natural partner" with 40 per cent interest.

Fast Development

"We have sorted out differences with Essar-Premier consortium over signing of PSC and has also entered into an initial memorandum of association (MoA). We have also reconfirmed the same to the Union Ministry of petroleum and Natural Gas," the ONGC Chairman, Mr R.S. Sharma, told Business Line.

Confirming the news, an Essar Oil official said the development was expected to pave way for signing of PSC and fast development of the oilfield. According to the company, the field is located in 45-50 metre of water depth and includes proven blocks such as R - 12, R - 7, R - 9, R - 10, R - 13 as well as other blocks that have very high possibility of moving into the proven category.

Delay Caused

Ratna-R-Series oilfield was auctioned along with 11 other such fields discovered by ONGC before the New Exploration Licensing Policy came into being. While a large number of them were already developed and are producing at optimum levels, Ratna-R oilfields courted controversies and were subjected to delays from the very beginning.

The controversy took a new turn in early 2005, when ONGC claimed the operatorship of the field at payment of much higher levels of royalty and cess. As against the agreed cess of Rs 900 per tonne and royalty of Rs 528 per tonne, ONGC offered payment of Rs 1,800 per tonne as cess and 10 per cent of the well head oil price as royalty. Reacting to ONGC's offer, the Ministry of Petroleum had also asked Essar to enhance payment of royalty and cess.

The move, however, did not find the favour of Union Law Ministry, which had advised the Petroleum Ministry in early 2006 to finalise the PSC as per the previously agreed terms and conditions. Doubts were raised by ONGC on crude evacuation evaluation plan agreed way back in 2001 and a few other issues.