Petrom and ONGC in oilfield equipment row

Vol 7, PW 2 (09 Apr 03) People & Policy

PETROM OF Romania is embroiled in a simmering row with ONGC over redundant oilfield equipment from BB-OS/5, as both sides wind up operations and return the block to the government.

At issue is Article 27 of the PSC, which mandates that all leftover equipment used for petroleum operations should be handed to ONGC "free of charge". Petrom and its Indian partner Essar disagree with ONGC over the interpretation of these crucial three words: "free of charge".

Petrom-Essar's position is that "free of charge" means free of any encumbrance or lien but to ONGC these words mean, "free of cost". Plainly, ONGC wants the equipment without paying anything, while the consortium is unwilling to play donor of equipment worth about Rs70 lakh ($146,000).

"This is not Christmas," reveals a source. "We are not Santa Claus to go around giving gifts to ONGC." Petrom-Essar believes ONGC's expectations are unjustified.

"Why should we give equipment free of cost to ONGC when we spent $12.5m on this block" he adds. "Privately, some ONGC officials agree with us, but some are insisting on getting the equipment free of cost.

If there is no resolution, this dispute will go to arbitration." Last month operator Petrom formally returned BB-OS/5 to Shastri Bhawan following its failure to find a buyer for its (51%) stake in the block. Essar holds 49%.

British Gas was the only company among 13 that evinced any interest but last month wrote to Petrom saying it was unwilling to go ahead. Contacted by PETROWATCH, a BG spokesman declined to elaborate.

Petrom feels the decision is linked to BG's plans for investment in post-Saddam Hussein Iraq.