A tug of war with the petroleum and natural gas ministry's directorate general of hydrocarbons (DGH) has impelled British oil and gas giant BP to seek complete access to the exploration area in one of its blocks in the Krishna-Godavari (K-G) basin, which it earlier wished to relinquish.
This is the only block in India where BP is the lead operator; Mukesh Ambani's Reliance Industries is the other major partner. The hydrocarbon regulator has reiterated a demand to pay a penalty towards an unfinished Minimum Work Programme (MWP); the company says this is a deviation from the production-sharing contract (PSC). Earlier, the company had offered to surrender the block, after a defence ministry hurdle came up. Now, it wants complete access, in line with the PSC.
“We are seeking your intervention to resolve this issue and allow us to relinquish this block without imposing any penalty. Alternatively, please intervene with the MoD (defence ministry) to allow us access to the entire contract area, in order to carry out unconditional and unrestricted petroleum operations as envisaged by the PSC,” BP Group country head Sashi Mukundan said in a recent letter to the ministry.
About 70 per cent of KG-DWN-2005/2, the D17 block in the K-G area, allotted in the seventh round of auction under the New Exploration Licensing Policy in 2008, was coming under an area where the “debris of rockets after stage separations are likely to fall” and where navy exercises are also conducted.
The company had further stated that as the size of the 1,949 sq km block was small, flexibility for design changes as demanded by MoD was minimal. When asked, a BP spokesperson said, “We are in discussions with the DGH and are hopeful on sorting the issue. We have already made some investments in the block.” Payment of fines would be several million dollars, say company sources. The defence ministry issued a restriction on any permanent construction in the region,
In a letter to the petroleum ministry recently. Mukundan's letter notes the contractor bid for the block was clearly based on unrestricted access to all of it.