Govt slaps $314-m notice on Ravva block consortium

Written by Siddhartha P Saikia | New Delhi | Updated: Jul 17 2014, 20:10pm hrs
Ravva offshore oilGovernment has slapped a notice on the consortium of explorers that run the Ravva offshore oil and gas fields on the east coast, asking for payment of $314 million. (Reuters)
In an unexpected move, the government has slapped a notice on the consortium of explorers that run the Ravva offshore oil and gas fields on the east coast, asking for payment of $314 million.

Cairn India has a 22.5% operating stake in the field, ONGC holds 40%, while Videocon India and Singapore-based Ravva Oil hold 25% and 12.5%, respectively.

The over-a-decade-long dispute going on in the Ravva field is over the profit sharing ratio between the government and contractors, which was based on post-tax rate of return (PTRR) earned by the companies.

According to the petroleum ministry, the companies wrongly depressed the PTRR and as a result also underpaid profit petroleum (the governments share of profits after cost recovery) to the tune of $284 million.

Subsequently, the companies invoked arbitration in two separate proceedings, one by Cairn and Ravva Oil and another by Videocon Industries. The awards, however, went against the government.

In view of this, the explorers started deducting the amount from the profit petroleum that the government feels is due. The total disputed amount added up to $314 million, which included $15 million short payment by Videocon detected later.

The government is now asking for the money again because the award by a foreign tribunal has not yet been enforced in India. Any award by a foreign tribunal should be enforced through a court in India before it can be implemented. The government has also reserved the right to file for non-enforcement of the arbitration awards, on the ground of being violative of public policy under Section 48 of the Arbitration & Conciliation Act, a petroleum ministry official told FE.

However, Article 34.8 of the Ravva production-sharing contract, says, ...decision of the arbitral tribunal, and in case of difference among the arbitrators, the decision of the majority shall be final and binding among the parties. In addition, Article 34.12 says, Venue of the arbitration proceedings, unless the parties otherwise agree, shall be in Kuala Lumpur, Malaysia, and shall be in English.

The Ravva joint venture is strictly complying with the provisions of the PSC which includes carrying out the operations in accordance with the approved work programme and budgets and accounting therefore and also determining cost and profit petroleum, said an official with one of the explorers, requesting anonymity.

Industry experts too are of the view that the governments move is irrational. It is unfortunate that DGH (Directorate General of Hydrocarbons) is obtaining opinion ex parte opinion and advising the petroleum ministry, which is causing avoidable litigation and creating hurdle for explorers who are working for Indias energy security vision, said an industry watcher.