Tapti budget approval delay over $355m dispute

Vol 15, PW 7 (06 Oct 11) Exploration & Production

Securing government approval for an approximate $300m work programme at the fast depleting Tapti gasfield is proving a major headache for joint operators BG, ONGC and Reliance.

Already five months delayed, approval should have come at the start of this year’s fiscal, but oil ministry officials continue to deny consent until the PMT consortium pays a disputed $355m to the government as penalty for excess expenditure over approved spending at Tapti since the PSC was signed in 1994. Oil ministry intransigence was on full display at the last management committee meeting at ONGC’s office in Mumbai on September 15, attended by joint secretary DN Narasimha Raju, director exploration Partha Das and several DGH officials.

“Raju and Das said they wouldn’t approve the Tapti budget because of the outstanding $355m,” reports a source. “We protested that we cannot pay the money anyway because the matter is still under arbitration.

” BG and Reliance, he adds, launched arbitration against the government last year for not allowing the $355m to be ‘cost recoverable’. Only one hearing has been held so far and no date is fixed for the next hearing.

Ideally the Tapti field budget should have been approved by April this year at the latest. But the ministry doesn’t want to clear additional capital expenditure as the consortium could later claim this as part of its ‘cost recovery’.

What’s the way out “PMT partners can go ahead and spend money at Tapti without the ministry’s approval,” suggests a source. “They could later initiate further arbitration proceedings to claim ‘cost recovery’.

” Since no drilling is likely at Tapti till the dispute is resolved, the following five companies who submitted bids by September 14 in a BG rig tender would be well advised to look for other work: Jindal Drilling, Greatship, Ensco, Noble Drilling and Transocean.