Cairn arbitration over Mangala cess

Vol 13, PW 10 (22 Oct 09) News in Brief

Cairn India has launched arbitration proceedings against ONGC and the oil ministry over payment of cess (tax) on oil production from RJ-ON-90/1.

PETROWATCH learns Cairn sent a â€کnotice’ early this month saying the licence holder (ONGC) should pay the entire cess of Rs2550/tonne ($51). Cairn’s â€کnotice’ lists meetings held with the oil ministry and DGH during which it disputed its liability to pay cess as the PSC is silent on the matter.

Under the PSC, arbitration must be held in London. “Arbitration was inevitable,â€‌ we hear.

“Cairn has one view but the oil ministry and ONGC have another view.â€‌ Indian authorities are clear that cess must be paid by Cairn (70%) and ONGC (30%) in proportion to their stakes in the fields.

Actual arbitration, we hear, will be a long drawn out affair, “with no finality any time soon.â€‌ Mangala production began on August 29 and the first 29,000 tonnes was delivered to ONGC subsidiary Mangalore Refineries on October 9.

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