The Hindu Business Line : Ratna R-series: Essar awaits nod for oil field development

State of affairs
Petroleum Ministry has consulted the Ministry of Finance on cess, royalty.
Negotiating team of secretaries says statutory levies should be at old levels.
Essar hopeful of concluding the contract at the earliest.

Richa Mishra

New Delhi, Sept. 14 Essar Oil Ltd may have to wait a while longer before it can go ahead with its plan to develop Ratna-R-series oilfield off Mumbai, as the Petroleum Ministry is yet to take a final decision on the applicability of cess on crude oil produced from the fields.

According to official sources, the Petroleum Ministry wants to tread cautiously and is also consulting the Law Ministry.

“We want to consider all aspects before taking a decision, as it involves the issue of production sharing contract (PSC) and applicability of cess,” sources told Business Line. When contacted, sources in Essar said: “As far as we concerned, we have not been made aware of any pending issues in connection with Ratna R-series. We are hopeful of concluding the contract at the earliest.”

The Petroleum Ministry has already consulted the Ministry of Finance on the applicable rate of cess and royalty, in accordance with the terms of concluded contract on petroleum crude oil in Ratna R-series fields awarded under the PSC to the consortium comprising ONGC, Essar Oil, and Premier Oil Pacific Ltd.

Field discovery

The Ratna-R-Series field near Mumbai High was discovered by ONGC in 1994 but was later awarded to a consortium of Essar Oil and UK’s Premier Oil against an agreed cess of Rs 900 per tonne and royalty of Rs 528 a tonne for the crude to be produced from the field.

However, the development of the field was delayed after ONGC reclaimed operatorship quoting a higher royalty and cess than proposed by Essar to the Government. The Ministry had then asked Essar to better the ONGC offer. Subsequently, ONGC and Essar sorted out the issue.

According to sources the Finance Ministry, while giving its nod, has communicated that the Petroleum Ministry may take necessary steps in consultation with the Law Ministry to prescribe the applicable rate of cess and royalty in terms of the concluded contract on petroleum crude oil produced in Ratna R-series fields.

A negotiating team of secretaries had also considered the issue of finalisation of contract. The secretaries team had concluded that based on the legal opinion of the Attorney General and Law Ministry, the contract stood concluded and statutory levies should be maintained at the old level.

Proven blocks

Essar Oil holds 50 per cent interest in the field, ONGC holds 40 per cent, and the remaining stake is with Premier Oil. The field includes several proven blocks like R-7, R-9, R-10, R-12 and R-13, along with other high possibility blocks. The field has proven blocks with an initial proven in-place reserve of 500 million barrels.

Ratna-R-series oilfield was auctioned along with 11 others discovered by ONGC before the New Exploration Licensing Policy (NELP) rounds were introduced.

While a large number of them are developed and are producing at optimum levels, Ratna-R-series oilfields courted controversies and were subjected to delays from the start.