Sympathetic hearing to Reliance position from ministry

Vol 10, PW 7 (27 Jul 06) Exploration & Production

Reliances proposal to spend money it would otherwise spend on fines on alternative exploration work is getting a sympathetic hearing from the oil ministry.

PETROWATCH learns several meetings have been held with Reliance and that things are moving forward. Most important, argues the ministry, Reliance is not challenging or questioning the fines and other penalties for non-completion of the work programme.

And rightly so, because Reliance, or any other operator, argues the ministry, will not be allowed to set off excess work in one block with unfinished commitments in another block. Every PSC is a stand-alone document, argues the ministry.

You bid for each block separately. No work programme commitment is transferable from one block to another.

Cost recovery formulae for blocks are based on the work programme committed. Cost recovery cannot be transferred from one block to another, adds our source.

There is no question of allowing Reliance to transfer work pending in other blocks to D-6. We want the whole country to be explored - not just D-6.

Reliance cannot say we have not done work in this or that block but are going to spend all that and more money at D-6. Still, the ministry is ready to be flexible.

We accept that Reliance might have run out of ideas for a particular block and that its geological model might have failed, he says. We agree there is no point in sticking to the letter of the work programme in such blocks.

We are not here to collect fines. Our goal is to ensure that the country is explored.

One proposal from the ministry is that Reliance and other operators in a similar position agree to carry out exploration work in neutral, unrelated blocks to add to the store of geological knowledge about that area. Such areas can be carved out and offered under subsequent rounds of NELP, we hear.

But on no account, says the ministry, would such exploration work (in lieu of fines) benefit from cost recovery clauses in the PSC.