Essar and Premier talk with different voices in Ratna negotiations

Vol 3, PW 25 (19 Jan 00) Exploration & Production

Do Essar and Premier Oil have differing views about how to proceed in negotiations for the discovered Ratna and R Series of oilfields near the Bombay High A source close to negotiations certainly thinks so.

This report learns that the Indian oil ministry is confused by the apparently contradictory signals coming from both parties, as negotiations continue on a Production Sharing Contract (PSC) for the field, which holds approximately 100m barrels of recoverable crude. One day a letter comes from Essar, the next a letter comes from Premier saying something else, Petrowatch learns, People in the ministry think there is an internal tussle between the two parties; that there is disagreement on how to proceed.

In November last year Essar and Premier were invited to begin PSC talks on Ratna - a full five years after the fields were first tendered. Essar holds a 50% stake, while Premier holds 10% and is the designated operator.

State explorer ONGC holds the remaining 40%. In December negotiations stumbled over a demand by Premier for a 3rd party audit of the field and associated infrastructure, which it said had degenerated over time.

This report learns the oil ministry continues to oppose Premiers request and insists on what it describes as a Joint Inspection carried out by the three parties to the contract. They (Premier) can include anyone they want in that team, a source tells this report.

Essar is believed to favour the ministrys goal of an early PSC signing, hence the disagreement with Premier. As for the negotiations, the oil ministry awaits Premiers next move, but insists that, the original PSC terms are non-negotiable.

This includes a $5m signature bonus and the profit-sharing agreement. The only area where there appears some flexibility in the oil ministry position is the need for investment to upgrade old infrastructure.

LNG Summit