Four oil companies walk out, give up 7-times Reliance Industries' KG area

Apr 29 2014, 08:48 IST
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In Enis case, it won the block almost a decade ago, in  NELP V. Reuters In Enis case, it won the block almost a decade ago, in NELP V. Reuters
SummaryItaly's ENI joins global majors BHP Billiton, Santos, BP in giving up nearly 57,000 sq km of oil/gas blocks.

ENI of Italy joins other global majors like BHP Billiton, Santos and BP in giving up nearly 57,000 sq km of oil/gas blocks in areas from Mumbai offshore to the KG Basin. In terms of size, this is close to 50 times the KG-D6 fields that Reliance Industries currently holds and seven times the initial area RIL had in the KG Basin.

Failure to develop the fields would invite penalties under Indian law, but sources said the petroleum ministry might give these energy giants a waiver from fines amounting to a few million dollars.

The leniency, sources said, is in view of the fact that these companies, which won these unexplored fields by taking part in auction, share little blame for their failure to perform the minimum exploration work committed in these fields holding up of clearances at various levels and bureaucratic delays did them in. The ministry wants to ensure that the global majors refrain from taking legal recourse and stay put in Indias already battered oil and gas sector, the source added.

Upstream oil regulator Directorate General of Hydrocarbons (DGH) is learnt to have advised the ministry against invoking the penalty clause for unfinished work.

The area that the companies want to relinquish is spread across 13 blocks.

Under the production-sharing contract, the explorer is required to complete the minimum work programme before relinquishing the acreage. Else, unfinished work attracts penalties and bank guarantees are forfeited.

As for the individual blocks, Italys Eni bagged AN-DWN-2003/2 located west of the Andaman Islands in the fifth round of auction under New Exploration Licensing Policy (NELP) regime. The explorer holds 40% of the asset and with its partners ONGC and GAIL signed the production-sharing contract on December 5, 2005.

In October 2010, Eni sought permission from the department of space (DoS) for drilling the first exploratory well.

As per the minimum work programme, seven wells were to be drilled in three years, but that was not to be as the DoS clearance was denied on November 26, 2010. On February 23, 2012, the petroleum ministry informed ENI that the DoS had granted the clearance subject to certain condition. To this, ENI told the nodal ministry on March 5, 2012, that it can go ahead only after it receives a written confirmation saying unrestricted and safe access to the contract area is being provided. On October 25, 2013, the DoS gave its

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