Cairn told to follow correct procedure with Ambe FDP

Vol 12, PW 3 (26 Jun 08) Exploration & Production

Cairn India is under fire for not following the correct procedure in its submission of the Field Development Plan (FDP) for the Ambe gasfield, which lies in 12 metres water depth within the CB-OS/2 block in Gujarat.

PETROWATCH learns the DGH has returned Cairn’s hastily prepared FDP with a curt note that it first needs approval by the Operating Committee (OC), which includes partners ONGC (45%) and Tata Petrodyne (15%). After that, says a source, the correct procedure is for the FDP to be approved by the block’s Management Committee (MC), which is headed by a DGH official representing the government.

“Someone at the oil ministry asked the DGH how it could recognise a document that hadn’t even been approved by the OC,â€‌ we hear. “Cairn has not even formally presented the FDP for Ambe to the OC.

â€‌ In April, we reported how Cairn only just beat the March 31 deadline by submitting the eagerly awaited FDP for Ambe with simultaneous letters to OC and MC members. “Cairn wanted only to beat the March 31 deadline,â€‌ adds a source.

“It sent letters to everybody but this is not the way to do things. The procedure to be followed is clearly laid down in the PSC.

â€‌ Aside from procedural lapses, feedback from Cairn’s partners indicate they are happy with the technical side of the FDP for Ambe, if slightly worried about the cost of development, even though it hasn’t yet been formally discussed by the OC. ONGC, in particular, is believed to consider the Ambe development cost too high.

“There has to be some drastic cost cutting of the Ambe FDP,â€‌ we hear. “There should be benchmark figures against which these costs can be compared.

â€‌ As the original block licensee, ONGC is keen to cut costs to the maximum extent because in addition to its share of CAPEX it must also pay all the cess and royalty on production. Cairn estimates Ambe holds about 40bn cubic feet of sweet gas of which 34bn is recoverable over seven years.