New Delhi: The Director General of Hydrocarbons (DGH) has asked HOEC to respect and follow the Production Sharing Contract (PSC) in PY-3 oil block.
DGH has asked HOEC to pay bank guarantee for 10 per cent of its share of budget in 30 days’ time, starting September 22.
Sources say that the Petroleum Ministry wants to pursue the target of reducing oil imports by 10 percent at any cost and has therefore given instruction to DGH to implement each project diligently.
DGH, in turn, has indicated to HOEC that if it fails to comply by the PSC than under the contract it will be evicted from the oil block. The 20-21 per cent stake of HOEC will be distributed amongst ONGC, Hardy Exploration and Tata Petrodyne as per the ratio of their holding in the block.
Industry observers note that HOEC single handedly stopped the production from the prolific PY-3 fields in 2011 when it declined to pay the due to the service provider. The issue was dragged to an arbitration court in Malaysia.
The operator of the block, Hardy, cleared all the dues. However, HOEC again refused to pay the operator as well.
The arbitration court asked all the players to pay the operator. ONGC and Tata Petrodyne paid their amount to Hardy Exploration. But HOEC yet again used the delaying tactic and sat on the order till the last day to appeal. HOEC has not even paid the dues of the arbitrators in this case.
Sources say that HOEC is probably not investing in PY-3 oil block as it does not have enough monetary resources because of its mounting liabilities. An industry report says that the company wants to raise some funds by selling its entire participating interest in PY-3 so that it can payback the debtors. However, considering DGH’s nudge, HOEC may not be able to sustain its delaying tactic any further.
The PY-3 oil block in the Bay of Bengal has the potential of one per cent of India’s oil production. This will help in lowering the dependence on oil imports and hence play a big role in India’s endeavors to become self-reliant (Aatmanirbhar).
Ramping up production from discovered oil and gas fields could help the country achieve the target of lowering imports by 10 per cent, set by Prime Minister Narendra Modi. Unfortunately, the PY-3 oil field has been shut for almost 10 years now. Considering PY-3 contributing an incremental 1 per cent of domestic production (approx $132 million per annum) India has probably incurred a loss worth more than $1 billion (Rs 8,000 crore).
Sources say, gauging the seriousness of the situation, Directorate General of Hydrocarbon (DGH) — technical arm of Ministry of Petroleum and Natural Gas (MoPNG) — called a meeting of operators. The participants included state owned oil major ONGC, which has a 40 per cent participating interest in the block. However, the DGH faced a stiff resistance from Chennai based Hindustan Oil Exploration Company (HOEC), which seems to have stalled the project all this while.
All the players in the PY-3 oil block – HOEC, ONGC, Hardy Exploration and Tata Petrodyne -attended this meeting. Barring HOEC, all the players including the government nominees from DGH and MoPNG agreed on the work program (WP) and the full budget to re-start the production from this crucial oil field. Sources in the government said that HOEC has 21 per cent participating interest in the oil block but the company is not ready to pay 21 per cent of the approved work program of $7.7million for 2020-21.