Some DSF winners might walk off empty-handed

Vol 20, PW 11 (23 Feb 17) People & Policy

Imagine how embarrassing it would be for the oil ministry and DGH if multiple winners of the Discovered Small Fields round back out.

Yes, it might happen! Possibly before PSCs are signed, probably sometime in March, as companies come to their senses. "Many bids were irrational," says a consultant who worked with bidders.

"In some cases, bidders offered 40-60% revenue share to the government. How can anyone make money offering so much revenue?" Such a scenario would be problematic because the DGH has no provision to offer a field to a second-ranked bidder.

Blame the government's decision to give more marks for revenue share while watering down the minimum work programme requirement. "Exploration commitments should have been mandatory," we hear.

"If a winner decides to back out now, all he will lose is a Rs10 lakh ($16,600) bid bond. This is better than investing say Rs20cr ($3.3m) on a dud field." On a brighter note, we hear some provisional winners have begun looking for investors to help them finance their exploration programmes.

On February 15, the ministry announced that the Cabinet Committee on Economic Affairs led by Narendra Modi had approved the award of 31 contract areas. "We've yet to receive the meeting minutes," said a DGH source on February 17.

"We've only read about the awards in the newspapers. Once we receive the minutes we will begin preparing PSCs."

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