ONGC rejects British Gas offer on Panna Mukta operatorship

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Mumbai/New Delhi, Nov 27: The $388-million deal for the purchase by British Gas (BG) of Enron’s 30 per cent equity stake in the Panna Mukta Tapti oil and gas fields was thrown into jeopardy on Tuesday with ONGC rejecting BG’s offer in lieu of which the British company wanted the PSU major to withdraw its claim for operatorship rights of the fields.

BG has put sole operatorship as a precondition for going ahead with the deal for buying Enron’s stake in the three-way joint venture, which also has ONGC and Reliance as 40 per cent and 30 per cent stakeholders, respectively.

After a crucial board meeting, ONGC, in a tersely-worded statement, said: “The board noted that the BG offer is not sufficiently responsive for ONGC to agree to accept BG as operator in place of Enron.”

When queried about the ONGC decision, sources close to BG said they had no comment to make.

BG had earlier offered ONGC equity in its exploration acreage in Brazil and a settlement in the cash-call dispute in lieu of the operatorship rights, but the PSU major was clearly not impressed with the offer. The ONGC unions have also been making a case for the corporation sticking to its claim on operatorship since it had the required expertise and also had discovered the fields.

With ONGC clearly rejecting the BG offer, the ball is now firmly in the British major’s court. This throws up two basic possibilities. One, if BG decides to pull out of the deal because it has not managed to acquire the sole operatorship rights, then the operatorship remains with current operator Enron, which, however, has decided to exit this business in India. In such an eventuality, a decision will have to be taken by Dynegy Inc., which is on the verge of buying out the US energy giant worldwide for $9 billion.

The second eventuality, which most believe is an unlikely one, would be BG agreeing to stick on with the Panna Mukta Tapti investment and go through with the deal despite losing the operatorship claim. Then the ball would be back in the courts of ONGC and Reliance, both of whom have staked their claims for operatorship. ONGC and Reliance, for the moment, are on the same side of the table in the battle for operatorship with BG.

Reliance sources declined to make any comment at this juncture on what their future gameplan would be, terming it as “premature”, since BG had not yet made any formal statement on what course it would take.

The deal between BG and Enron was slated to be completed by October 31, but BG had extended it indefinitely in the hope that the operatorship issue would be resolved latest by mid-December. BG has made it clear a number of times that it would not be interested in the deal if it did not get sole operatorship rights.

Even as BG had been sticking to its stand, other suggestions had been emanating on the operatorship front. One option which had been suggested by the other joint venture partners was for the three stakeholders to set up another joint venture company only for operatorship, reflecting the shareholding pattern of the main venture and run it. The other option was to give one of the three fields each to the three partners.