Ministry rejects Niko demand for pipeline arbitrator

Vol 6, PW 9 (03 Jul 02) Exploration & Production

ITS A CURIOUS saga, and one that shows no sign of ending.

Niko Resources of Canada, Gujarat State Petroleum and the oil ministry remain locked in battle over the "cost recovery" status of a 36-inch gas pipeline from the Hazira gasfield. In the latest twist we understand Shastri Bhawan lawyers will reject a demand by Niko to appoint an arbitrator in alliance with Gujarat Petroleum, when all sides meet for the next Supreme Court hearing in Delhi on 12th July.

At issue is the cost of constructing the pipeline, laid three years ago from Hazira to the village of Mora. Can it be set against gas revenues under the production sharing contract Niko and GSPC say yes, Shastri Bhawan says no.

So why does Niko want it to nominate a joint arbitrator with GSPC, argues Shastri Bhawan "There can not be one arbitrator representing the government and GSPC because their interests are not common," we learn. "The interests of Niko and GSPC are identical on cost recovery." More, government lawyers will question the entire basis of the arbitration proceedings, arguing that the 36-inch pipeline falls outside the PSC and that in August 1999 the Directorate General of Hydrocarbons expressly forbid the consortium from building the pipeline.

It was never approved by the Management committee. The dispute is outside the PSC.

There can be no arbitration over it. Any dispute over cost recovery should be raised by the contractor, which means GSPC-Niko jointly.

One arbitrator is to represent GSPC-Niko and the other the government."