Essar still at war with law ministry over Ratna oilfield

Vol 8, PW 5 (02 Jun 04) People & Policy
     

Essar Oils ill luck with the Ratna and R-Series oilfields continues.

The law ministry is unhappy with letters from Essar lenders, led by ICICI Bank, reassuring the ministry that they will not link revenue from the oilfields to loan agreements secured to finance the companys stalled 10.5m t/y refinery at Vadinar. Mere letters wont do, a senior ministry official tells PETROWATCH.

These are just pieces of paper. The law ministry wants to see the waiver on the legal papers.

The government wants ICICI Bank and other Essar lenders to amend the actual deed of their refinery loan and put that document before the law ministry. Its the deed that is essential, he adds.

Unless Essars lenders produce this nothing will move. On 25th March, a senior group of officials (Negotiating Team of Secretaries) sent the letters to the law ministry to vet their legality.

Last year, the oil ministry became suspicious and warned Essar that none of its lenders, including ICICI, could use the Ratna and R-Series oilfields as collateral for loans to finance the refinery. In April, 12 banks and financial institutions confirmed deletion of any charge on Ratna and R-Series from a total Rs9, 000cr loans to Essar to construct its refinery.

Of this Rs9,000cr, Essar secured term loans worth Rs390cr from banks and Rs916cr from financial institutions to fund construction of the refinery against future revenue from the Ratna and R-Series. Contacted by this report, Essar said it has yet to hear anything.

We are awaiting a response from the law ministry, a company official said. Asked whether Essars lenders will agree to produce the original deed, the official said: To be honest, as of now the refinery loan does not exist, he adds.

The entire agreement was scrapped after ABB left. Essar is confident its lenders will produce proof before authorities.

If the government wants to see proof well produce it. Essar has 50% interest in Ratna while ONGC has 40% and Premier Oil holds 10%.

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