The Hindu Business Line : Ratna-R-series oil field: Cabinet Secy’s Office raises queries

New Delhi, Feb. 19 It may take a while before Essar Oil Ltd and its consortium partners can go ahead with their plans to develop the Ratna-R-series oil field off Mumbai, as the Cabinet Secretary’s Office is understood to have raised certain queries on the Petroleum Ministry’s proposal to award the contract to the consortium.

After consulting the Ministries of Finance and Law on the issue of cess applicability on crude oil produced from the fields, the Petroleum Ministry had moved the Cabinet proposal. 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. Essar Oil holds 50 per cent interest in the field, ONGC holds 40 per cent and the remaining stake is with Premier Oil.

Treading cautiously the Petroleum Ministry, according to sources, had left it up to the Cabinet to take a final call on the issue. The Ministry while highlighting the revenue implications of the contract had also given the opinions of the Ministries of Law and Finance that the concluded contract must be honoured. Sources told Business Line that the Ministry has proposed that the contract be given on originally-agreed terms for the Cabinet to consider.

“All aspects were considered, as it involved the issue of production sharing contract (PSC) and applicability of cess,” sources said adding that the Ministry hoped to clarify the queries at the earliest.

Applicable rate

The Finance Ministry was consulted on the applicable rate of cess and royalty, in accordance with the terms of the 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.

The field was awarded to the consortium 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. According to sources, the Finance Ministry, while giving its nod, had 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 the Ratna R-series field.

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.

The field includes several proven blocks along with other high possibility blocks. It 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 rounds were introduced.

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