Cairn and ONGC still disagree about revised FDP cost

Vol 12, PW 26 (04 Jun 09) People & Policy

Cairn India still can’t convince ONGC of the need to nearly double development costs for the Mangala and other fields in Rajasthan.

In dispute is the revised Field Development Programme (FDP) of $2.9bn, up from an earlier approved $1.5bn. This thorny issue surfaced again during a block Management Committee (MC) meeting on May 27 attended by Cairn, ONGC, the DGH and members of ONGC’s Projects Appraisal Committee, which approves all major investment decisions before sending them to the board, invited by special request.

During the meeting, Cairn made a presentation about the revised FDP. “Some of the PAC members had questions,â€‌ we hear.

“But Cairn dismissed them and said all queries would be answered at the end of the presentation.â€‌ But when the presentation ended, Cairn said it hoped it had answered all the questions, and moved on! Among those attending was PAC head VP Singh and additional secretary S.

Sundareshan, who also sits on the ONGC board. During the meeting, says a source, Cairn caused consternation when it apparently announced that only a small amount remains remains to be spent and that this would be spent irrespective of whether ONGC agreed.

“ONGC was speechless,â€‌ we hear. “More so when they saw that the PAC members and Sundareshan kept quiet.

â€‌ One issue troubling ONGC is Cairn’s drilling costs. “Cairn is planning a 162 well campaign for the Mangala, Aishwariya, Raageshwari and Saraswati fields,â€‌ we hear.

“Typically an onshore well would cost $2m but each of Cairn’s wells is budgeted to cost several times this.â€‌ Worried, ONGC asked Cairn to make a presentation to the PAC in early May, to explain the drilling costs but no meeting took place.

On May 8, we hear, Cairn said it only recognised the MC as the authorised authority specified in the PSC, forcing ONGC to invite the PAC to the MC meeting on May 27.