Govt replaces Canoro with ONGC at Assam oil block

In the first replacement of the operator of an oil producing block, the government has asked Oil and Natural Gas Corporation (ONGC), the country’s biggest energy explorer, to manage the Amguri oilfield in Assam.

The original operator, Canoro Resources, had its production sharing contract (PSC) terminated on government order last year. The company, a listed Canadian one, had challenged this at the high court here, but lost the case earlier this month. It has since appealed to a larger bench of the High Court.

“The participating interest in Amguri has passed on to the government from Canoro Resources after the PSC was terminated. The government cannot manage an oilfield. Therefore, till the time it finds an operator, we have been asked to manage it,” said a senior ONGC executive. ONGC is a government-owned company.

Last August, the petroleum ministry had terminated the PSC between Canoro and Assam Company India Ltd (ACIL) for the Amguri block. Canoro owned 60 per cent and was the block operator, with ACIL holding the balance 40 per cent.

The termination, the petroleum ministry says, was justified due to a change in Canoro’s shareholding pattern. The replacement comes at a time when the Cabinet Committee on Economic Affairs (CCEA) is expected to decide the Cairn-Vedanta deal’s fate, in balance due to a change in the shareholding of Cairn India and not in the composition of the consortium operating its Mangala field in Barmer.

A few days after the Cairn-Vedanta deal was announced on August 16, 2010, the ministry in a termination order said Canoro had violated Article 29.2 of the PSC by not seeking the government’s consent before making a “material change” in the shareholding of the company. The order was dated August 28.

Interestingly, the pre-NELP (new exploration licensing policy) Amguri field was once abandoned by ONGC. The field was producing about 1,000 barrels of oil equivalent per day (boe) before its closure on December 3, 2010, on technical issues.

According to Sproule, an internationally recognised body engaged in making resource/reserve assessments, the reserve of oil condensate and gas at Amguri stood at 12.287 million Boe.

In April 2010, Canoro had raised Canadian $95 million through a mix of debt and equity from Barbados-based Mass Financial Corp, without the ‘required consent’ of the government.

Mass Financial initially got 18 per cent equity in Canoro but after the closure of the rights issue, it now holds 52.9 per cent.