Skoda resolves payment dispute with Indian Oil

Vol 4, PW 17 (27 Sep 00) Midstream & Downstream

A longstanding dispute between Skoda Export of the Czech Republic and Indian Oil is drawing to a close.

It centres on payment by IOC to Skoda for construction of a 1,440-km multi-product pipeline from Kandla in Gujarat to Bhatinda in Punjab. Petrowatch learns Indian Oil's board last month agreed a compromise figure for outstanding payment to Skoda for construction of the pipeline.

The board's resolution - dated 29th August - is sitting in oil minister Ram Naik's office awaiting approval. In 1993, Skoda Export won a contract to construct the pipeline at an approximate cost of $250m in an alliance with Larsen & Toubro and Stroj Export, also of the Czech Republic.

A target date of February 1995 was set for project completion, but the inability of Olex of Australia to lay a "Telesupervisory Cable Network" alongside the pipeline delayed implementation. As punishment, Indian Oil held Skoda responsible and encashed a bank guarantee of Rs150cr ($33m).

Indian Oil also halted further payment to Skoda. "The contract was heavily loaded in favour of IOC," reveals a source, "But Skoda wanted a pipeline contract in India so they signed." Despite IOC's action, Skoda continued work and the pipeline was completed two years behind schedule.

During construction, Skoda filed for arbitration to recover its money. In February this year the two sides reach an understanding on payment.

Skoda's board agreed immediately, but Indian Oil delayed its approval until last month.