Hostility to new E&P contract proposal

Vol 18, PW 4 (09 Oct 14) News in Brief

By now the government will be trawling through comments from E&P companies on a draft 110-page Revenue Sharing Contract (RSC) model submitted on September 30 to replace the PSC.

The consensus view among four operators we contacted is it would be silly to replace cost recovery with revenue sharing (“Revenue sharing is unsuitable for petroleum-poor countries like India. The risk of poor reservoirs is too high.

Private capital won’t be interested. PSUs don’t pay any attention to costs”) and foolhardy to penalise operators for producing less oil and gas than promised (“Production is dictated by commercial and geological reasons.

To penalise an operator for that is unacceptable”). Some features were welcomed, such as reducing work programmes in proportion to acreage relinquished and allowing operators to relinquish blocks without liability if post-award, as happened to Eni, it transpires half the block is in an ecological area.