Final hurdle to six Gujarat contracts

Vol 4, PW 17 (27 Sep 00) Exploration & Production

Good news at last for six discovered fields in Gujarat, following a decision by Heritage Oil Corporation of Canada to respond favourably to a last minute demand for "indemnity" by the Indian oil ministry.

A source in India has shown Petrowatch a copy of a letter sent to ministry officials on 11th September in which Heritage agreed to a request that it assume liability in the (unlikely) event of any future claim on the six fields by its former partner AMEC Process & Energy of Britain. Heritage also agreed to issue a similar assurance to Gujarat State Petroleum Corporation, its joint venture partner.

"If the government indemnity concern centres on the possibility that AMEC could contest that it had or should have been awarded an interest in the licence to the six fields," reads the note, "then Heritage is prepared to issue an indemnity to both the government and Gujarat Petroleum to cover any such claim." In March this year, AMEC - frustrated at delay in signing a PSC - withdrew from its partnership with Heritage to acquire a 30% stake in the six fields, awarded from the Second Invitation of Bids for the Development of Discovered Oil and Gas Fields, which closed in March 1994. AMEC later sold its stake to Heritage, which set up a subsidiary (Heramec) to pursue the Indian venture.

Hopes that contracts would be signed earlier this year faded when the Directorate General of Hydrocarbons and Gujarat Petroleum undertook stringent due diligence of Heramec. It is this report's understanding that the "indemnity" request by the oil ministry is the last hurdle to overcome ahead of the formal signing of Production Sharing Contracts.

In India, however, seeing is believing!