No one in ministry doubted آ“genuineآ” BP concerns

Vol 10, PW 15 (16 Nov 06) People & Policy

Nobody in the oil ministry doubted that BP had genuine concerns about the model CBM contract.

We were aware they were bringing to bear their international experience in these negotiations and in their view of the model contract, says our source. Three times their teams came over from London for discussions at the drop of a hat.

Nevertheless, the oil ministry had categorically told BP that some of the terms in the PSC were non-negotiable. We told them what could be and could not be accommodated.

We appreciate they took time because they had internal procedures to comply with. BP is the only global oil and gas major to have participated in an Indian CBM bidding round, following Shells surprising last minute decision not to bid.

Adds our ministry source: We are not being rigid about the model contract. During the negotiations some companies wanted a reasonable time between the effective date of the contract and submission of the bank guarantee.

We have allowed a 30-day period. Earlier, the model contract required companies to submit the bank guarantee on the day the contract became effective.

That is, on the day the state government awarded the Petroleum Exploration Licence. We agreed this was not convenient.

Another change in the model contract is the addition of three phases in the exploration period instead of two. Despite unfinished negotiations with BP, the ministry did not want to delay the other nine contracts and signed them on 7th November.

We already lost a lot of time, says a ministry source, referring to objections from the Anil Ambani group. We wanted to announce the award on 31st August and give two months after that for negotiations.

On 29th September, the Cabinet Committee on Economic Affairs overruled the Anil Ambani groups objections and upheld the earlier award. We shortened the time for negotiations because of this delay, we hear.

But most Indian companies had taken part in the earlier CBM rounds and were familiar with the model PSC.