And now, Cairn complains about govt delays slowing operations

After Reliance Industries, Cairn India has complained to the Oil Ministry about bureaucratic hurdles delaying approvals for routine matters that are critical for operations at properties like the giant Rajasthan oilfields.

"... Delays in getting timely approvals on (routine) matters have an adverse effect on the exploration, development and production schedules," Cairn India wrote to Oil Ministry on January 21.

Cairn listed out a dozen pending issues like finalisation of the point for which sale of crude from Rajasthan block can be made to private refiners, the sale of Rajasthan crude to Reliance's only-for-export refinery and allocation of crude oil produced from its fields for 2011-12.

Furthermore, resolutions approved by the Management Committee (MC), which comprises representatives from the oil ministry, sectoral regulator DGH and the oil company, have not been signed by the oil ministry for the Rajasthan oil block and eastern offshore Ravva oil and gas field for over three months.

For the Rajasthan block, "MC meeting has not been held in the last six months, due to which decisions on several critical issues are pending," Cairn said.

Previously, Reliance had complained to the Oil Secretary, saying even routine matters are stuck for review or approval for months together.

"Of late, we have been facing major difficulties in getting even routine proposals reviewed/approved," Reliance Executive Director P M S Prasad wrote.

He said the MC has not approved even the work programme for the KG-D6 block, the area that houses the nation's largest gas fields, for the current fiscal.

Reliance and Cairn are India's poster boys with respect to exploratory success and their eastern offshore KG-D6 gas find and Rajasthan oil discovery have been used by the government to attract private investment in the oil and gas sector.

Among other issues, Cairn said it has been selling most of the 125,000 barrels per day output from the prolific Rajasthan fields to private refiners Reliance Industries and Essar Oil for almost a year, but finalisation of the delivery point for sale to these refineries is pending.

"The issue of delivery points for the sale to private refineries remains unresolved for a long time, causing non- payment of cash calls by (partner ONGC) for the spur lines and facilities set up to deliver the crude to private refineries," Cairn said.

The company said buyers for crude oil produced from the Rajasthan fields, which accounts for one-fifth of domestic production, need to be identified early to "ensure there is no disruption in crude oil production."

"Assignment of Participating Interest (stake held by a company in an exploration area) under the PSCs by 100 per cent subsidiaries to Cairn India should be routine matters, but have been pending for several months with the Oil Ministry," Cairn said.

The PSCs recognise that assignments to affiliates are routine and should not be unreasonably withheld.
In an eight-page annexure to his four-page letter, Reliance's Prasad had listed over a dozen pending issues, along with dates.

"Some of the major issues that are still awaiting MC review/approval (include) the Work Programme and Budget (WP&B) for 2009-10 (revised estimate) and 2010-11 (Budget estimate) for KG-D6," he wrote.
Normally, the WP&B for a year is approved at the beginning of the financial year, but it has not been approved even though only two months are left in the fiscal.

Besides, RIL is still waiting for "a review of WP&B for 2009-10 (RE) and 2010-11 (BE) for other exploration blocks, approval of Budget for pre-development activities for KG-D6 (and) approval of delivery point of condensate (produced from) KG-D6," Prasad wrote.

"Delays in review and approval are bound to have an adverse impact on PSC timelines," he said.

He said the role of MC, according to PSC, is "restricted to that of a review function."

"While we are willing to incorporate inputs from the DGH and provide them with all reasonable information and justification, we request that the distinction between the review and approval function of the MC is maintained and respected by all parties," he wrote.

"Failure to maintain this distinction is resulting in a situation where even routine review activities (such as work programme and Budget) mandated under the PSC take inordinately long time," he said.