In an attempt to break a deadlock that has held back the exploitation of one of Mumbai High’s proven oil finds for 17 long years, the petroleum ministry has taken the call to scrap all earlier arrangements and go for fresh auction of the controversial Ratna oil block in the area.
While the law ministry, sources said, is still holding on to the view that the government cannot go back on its earlier decision as it would amount to breach of terms and conditions in the tender, the problem for the petroleum ministry is that the price at which the deal was settled is no longer viable.
The wheels are expected to move now after the petroleum ministry’s stand to go for fresh auction. The matter will also go to the cabinet, where a call would have to be taken on the legal implications of reversing an earlier decision.
In 1996, the Ratna and R-series oil fields were given to Essar at about $800 million. As of now, sources said, with proven resources of about 900 million barrels, the cost based on current oil prices would be close to $9 billion. Government sources said it would be difficult to award the contract at old prices and the company is against any price revision.
This, in effect, would mean scrapping the 1996 Cabinet decision to award the contract to Essar based on an open bid for 12 blocks in Mumbai High. Of these, 11 contracts were signed but this one could not be executed after certain doubts developed on the financial viability of the contracting company as well as other unresolved technical issues. With oil accounting for the majority share of the country’s import bill, sources said, a way had to be found out to start exploration in this block than be locked in an unending controversy.
All these 12 blocks were found by the Oil and Natural Gas Corporation and then put up for bid with ONGC continuing to keep 40 per cent share in each block.
For about four years after the Cabinet decision, the deal with Essar just could not take