The government has nominated Oil and Natural Gas Corp to operate the Panna-Mukta oilfields after the contract with Reliance Industries and Shell runs out in December, according to an ONGC executive.
Reliance and Shell each own a 30% participating interest in Panna, Mukta and Tapti (PMT) fields, while ONGC holds the balance 40%. Tapti stopped production three years ago while the other two fields have been sharply declining, prompting Reliance and Shell to decide on exiting the fields at the end of the 25-year lease in December.
The government has, therefore, directed ONGC to operate Panna and Mukta fields after the two private companies exit on December 21. ONGC is preparing to take over facilities of the two fields and put in place teams that will operate the fields, the executive said. Once it takes over, ONGC will reassess the fields and figure out their investment needs, he said. The output from these fields will attract royalty and cess as are applicable to production from any nomination field, the executive said.
Panna and Mukta produced 0.84 million barrels of crude oil and 11.2 billion cubic feet of natural gas in the April-June quarter, as per Reliance’s earnings report. Some of Tapti’s facilities have already been handed over to ONGC. The PMT fields, located close to Bombay High fields, were discovered by ONGC but the government, under its privatisation drive, handed over its operation to a consortium of Reliance Industries and Enron in 1994. Enron’s stake is now owned by Shell.
Reliance and Shell are engaged in an arbitration with the government over the state’s share of revenue from the PMT fields. ONGC is not party to the arbitration, but will have to honour the arbitration award.
Last year, the oil ministry ordered Reliance, Shell and ONGC to together pay $3.8 billion as the increased share of the government’s earnings from the PMT fields, following an arbitration award in government’s favour.
Reliance and Shell challenged the award in a UK court, which upheld the arbitration panel’s decision on most counts but referred the matter over how much development cost the companies could recover back to the tribunal, which is again hearing it.
Exit of Reliance and Shell from these fields will have no bearing on the final arbitration award.
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