Cairn: ONGC demands Rajasthan 'pit oil' proceeds

Vol 18, PW 12 (12 Feb 15) People & Policy

ONGC feels betrayed by its master, the oil ministry, in a heated dispute with Cairn India over who has the right to revenue from ‘pit oil’ produced at RJ-ON-90/1 in Rajasthan.

On January 29 ministry officials directed the DGH to trash its recommendation that ONGC is entitled to the proceeds from small amounts of 'pit oil' pumped out during exploration and appraisal testing. Until now the DGH was firm that under current rules issued on December 15, 2004 'pit oil' belongs to the mining lease holder, in this case ONGC.

But the ministry returned the file to the DGH asking it to rethink its recommendation. “Now we have to tailor our recommendation to what the ministry wants,” says a DGH source.

“But to implement this, the government will have to change the 'pit oil' policy because it can't be done for a single block.” ONGC accuses the ministry of blatant bias.

“All 'pit oil' produced at this block is ONGC property,” argues a senior ONGC source. “How can we give it up? If the government wants us to give in to Cairn then it should tell us in writing.

” Operator Cairn produces between 7000-10,000 b/d of pit oil from RJ-ON-90/1, worth a tidy $130m-186m a year. Gross oil production was 218,900 b/d from October 1 to December 31, 2014.