Carried interest row divides Naftogaz and Adani

Vol 14, PW 18 (10 Mar 11) Exploration & Production

All is not well between Ukraine’s Naftogaz and Ahmedabad-based Adani Welspun Exploration at their two NELP-VI onland blocks, AA-ONN-2004/4 and CB-ONN-2004/5.

“Naftogaz is refusing to pay its share of exploration costs,” reports a source. “It says it is ‘carried’ by Adani.

” Adani and Naftogaz, he adds, have been arguing since last year over the extent of ‘carried interest’ at both blocks, echoing a long-standing dispute between Canada’s GeoGlobal Resources and GSPC at their KG block. In this case it is difficult to know whether Adani or Naftogaz is to blame, as they don’t have a written agreement outlining the terms of their partnership, unlike GeoGlobal and GSPC.

“Both Naftogaz and Adani ‘informally’ agreed to some terms when they bid for these blocks in NELP-VI,” we learn. “But there’s nothing in writing.

” Officially, Naftogaz is the operator at the 95-sq km AA-ONN-2004/4 block in the Assam-Arakan basin and the 75-sq km CB-ONN-2004/5 block in the Cambay basin, holding 10% stakes. But in reality, Adani is calling the shots as the majority partner with 90% stakes.

Things are getting so bad that Adani has stopped informing Naftogaz about the progress of exploration work altogether and has begun “taking decisions unilaterally.” Till date, the consortium has shot 90-lkm of 2D and 90-sq km of 3D at CB-ONN-2004/5.

It has also drilled three exploration wells at this Cambay basin block of which one was dry while another had “oil shows but the zone was not tested” and the third “was damaged because of loose cementing.” At AA-ONN-2004/4, Adani and Naftogaz have shot 200-lkm of 3D and 95-sq km of 3D.

Earlier this month (March), Adani completed the first of five exploration wells committed in Phase-I at the block. “This well turned out dry,” we hear.