DGH lets GSPC breathe easy over Tarapur block

Vol 10, PW 5 (29 Jun 06) People & Policy

Gujarat State Petroleum heaved a sigh of relief on 22nd June when the DGH withdrew a termination notice for onland Gujarat exploration block CB-ON/2, also known as the Tarapur block.

This puts an end to speculation that GSPC might lose the block or be barred from future licensing rounds. A one-page letter, signed by DGH official Savinder Gupta, and issued with the approval of DGH boss VK Sibal, formally announces that the termination notice is withdrawn and that GSPC is eligible to take part in this and future licensing rounds.

In the letter the DGH says the notice has been withdrawn because GSPC has submitted the required bank guarantee, which the DGH claims should have been renewed in March. We are happy the matter is closed, a Gujarat source tells this report.

Negative publicity could have jeopardised our plans to secure alliances for NELP-VI. DGH officials had threatened to bar GSPC from bidding in the ongoing NELP-VI licensing round because of its failure to submit the bank guarantee.

Another source in Gujarat says the entire episode shows the DGH in poor light because there was no logical reason for it to send a termination notice to GSPC in the first place. First of all the DGH has no powers to issue such a notice, we hear.

The notice was issued because GSPC had not submitted a bank guarantee but GSPCs existing bank guarantee for 2005-06 is valid till 30th June. Why did the DGH issue a termination notice on 5th June GSPC submitted a detailed reply to the DGH on 6th June but heard nothing back and on 7th June submitted a bank guarantee worth Rs26.07cr for 2006-07 regardless, if only to keep the upstream regulator in good humour.

PETROWATCH learns that only after GSPC managing director DJ Pandian wrote to joint secretary exploration Sunjoy Joshi on 21st June did the DGH withdraw its termination notice. GSPC believes it is on solid ground because it has far exceeded its minimum work programme at CB-ON/2.

Bank guarantees are meant to cover only the minimum work programme, adds a source. Not any additional work that the operator voluntarily does.