DGH angry with Mosbacher over bank guarantee

Vol 10, PW 7 (27 Jul 06) People & Policy

Mosbacher is not on the best of terms with Indian upstream authorities.

In May this year it received a stern reprimand from the DGH, which threatened to strip Mosbacher of its 20% stake at CY-OSN-97/1 because of a delay in submission of its share of the bank guarantee for the block. Despite several letters and a Management Committee (MC) meeting decision on 15th May 2006, you have violated Article 29.2 of the PSC by not submitting the requisite bank guarantee by today, wrote the DGH to Mosbacher.

In view of the above, another special MC meeting will be convened on 29th May 2006 at 1500hrs in the DGH office to discuss the action to be taken against Mosbacher for not submitting the requisite bank guarantee as stated in the PSC. Continues the DGH: Decision will be taken as per Article 6.13 of PSC by majority and implemented.

Any absenteeism from the meeting will be viewed seriously. The DGH also rejected as unacceptable a clarification sent in by Mosbacher on the amount of the bank guarantee.

As per the PSC Article 29.2, the bank guarantee amount for your part of participating interest comes to $1,293,947 based on the estimated work programme submitted by the operator, said the DGH. Any addition or reduction to the bank guarantee can be subsequently made after operating committee/management committee approval.

Please note that the bank guarantee is to be calculated on the total estimated annual expenditure of the work programme, which obviously includes firm, and to mature work proposed in any year. In an earlier letter the DGH warned Mosbacher that it would be stripped of its 20% stake, which would first be offered to HOEC and (if refused) then offered on the open market.

Stunned by the tone of the DGH letters, a Mosbacher representative rushed to attend the special management committee meeting called on 29th May with the bank guarantee, hoping to end the controversy. HOEC pleaded with the DGH to cancel the specially convened MC meeting, but its requests were firmly rejected.

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