Deadlock continues in GSPC payment row with GGR
More than a year has passed since the row between GSPC and partner GeoGlobal surfaced over the exploration bill at KG-OSN-2001/3.
But still there’s no solution in sight. Hopes of a settlement emerged recently when GeoGlobal put forward a compromise formula to GSPC offering to pay its 10% share of the costs of developing the Deendayal gasfield.
“The cost of developing Deendayal works out to about $2bn,†says a source. “GeoGlobal says it is willing to pay its share as and when cash calls are issued.
†Some argue this represents a major compromise by GeoGlobal; whose original position was that under the Carried Interest Agreement with GSPC its share of both exploration and development costs must be paid by GSPC and adjusted against revenue from future gas sales from the block. But GSPC is unimpressed by GeoGlobal’s formula.
“We want GeoGlobal to pay its share of the exploration costs plus interest beyond the $6m that we are legally supposed to carry them,†says GSPC. So far, exploration costs have added up to $800m.
“GeoGlobal’s share works out to $80m plus interest,†we hear. GSPC insists that its responsibility to â€کcarry’ GeoGlobal is limited to 10% of the $59.23m budgeted in the bid document for Phase-I of the exploration period.
GeoGlobal disagrees and says the â€کcarry’ is limitless and covers both exploration and development. On August 16, 2007 the dispute became public when GeoGlobal acknowledged it in an announcement to shareholders.
Angry letters have since gone back and forth between both companies with GSPC at one point even contemplating to convene an Operating Committee meeting to have GeoGlobal declared a defaulter before evicting it from the block. Tempers subsequently cooled down.
What are the options “GSPC or GeoGlobal can place the issue before arbitrators,†we hear. “This is an option in the Carried Interest Agreement, Joint Operating Agreement and the PSC.
†Another observer advises the companies to settle amicably. “Arbitration creates bad blood,†we hear, “besides the additional expense on lawyers.
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