The Hindu Business Line : Ratna R-Series oil field — Oil Ministry seeks opinion of Law Ministry on ONGC's counter-claims

THE Union Ministry of Petroleum and Natural Gas has sought the Law Ministry's opinion on pending product-sharing agreement and ONGC's counter claims on the Ratna R-Series oil field.

The oil field was awarded to an Essar Oil (50 per cent)-led consortium way back in 1996. The other members of the consortium are ONGC (40 per cent) and Premium Oil Plc of the UK (10 per cent). ONGC was a natural partner in the oil field as per the tender norms.

While a number of issues were holding up the signing of the product-sharing arrangement for development of the field for almost a decade, the controversy took a new turn earlier this year, when the Ministry, riding on a counter offer from ONGC, asked Essar to enhance its previously agreed payment of royalty and cess from Rs 900 per tonne to Rs 1,800 per tonne.

The Ministry felt that with increase in oil prices, the State exchequer would be losing substantially if the consortium were allowed to pay cess and royalty at such a low rate.

According to sources, ONGC, which had explored the oil field till 1994, had already offered to pay the enhanced rate if the block was reverted to it.

The other member of the consortium, Premium Oil is, however, favouring payments as was decided during award of the oil field having an in-place reserve of roughly 500 million barrels.

When contacted, an ONGC official admitted that they were aware of the latest developments and were waiting for a positive outcome to their offer.

Sources in Essar Oil, however, felt that the controversy was simply delaying the development of the oil field.

"The Government had 11 other marginal fields along with the Ratna R series oil field in 1996 — all of which had agreed to pay cess and royalty at the same rate," a senior official said, adding that the company had no idea why this particular oil field should be treated differently.

Describing the development as `unfortunate,' he said a series of controversies had disrupted all efforts to develop the oil field so far.

"We have so far complied with all the tendering norms and practices in regard to this particular award. We hope the product-sharing agreement will be in place without further delay."