HOEC and ONGC arbitration for Andhra block

Vol 6, PW 5 (08 May 02) Exploration & Production

SIX YEARS ON and it finally looks like Hindustan Oil Exploration Company is closer than ever to getting justice in its long-drawn out saga with ONGC over a 20,000-sq km onland block in the Pranhita Godavari basin of Andhra Pradesh.

Both sides have agreed for arbitration. On 1st April, in Delhi's Taj Mansingh Hotel, presiding arbitrator Justice K.

Jagannatha Shetty held a first meeting of the tribunal, assisted by fellow arbitrators Justice Bhimrao Naik and Justice P.K Bahri.

"After resorting to a number of options we have finally taken the arbitration route," HOEC managing director Ajit Kapadia tells PETROWATCH. Back in 1993 operator HOEC and Mafatlal Industries signed a PSC for the 20,000-sq km block but HOEC was unable to go ahead with its work programme because of threats from the violent and extreme left People's War Group, which is active in the area.

HOEC invoked Force Majeure and wanted to cancel the contract. Angry ONGC refused and encashed HOEC's bank guarantee of Rs1.35cr ($270,000).

HOEC wants ONGC to return the money. Next date for hearing is 13th July.

Before that both sides have to go through an elaborate procedure. HOEC put in its 'statement of claim' on 15th April and ONGC has to reply and put in a counter claim by 22nd May.

By 10th June HOEC must counter ONGC's counter-claim. By 1st July ONGC can respond to HOEC and by 5th July both sides have to 'admit' or 'deny' documents.

When it's over you can bet the whole process will cost each side well in excess of the original bank guarantee sum of $270,000!