DGH accuses Cairn of breach of trust

New Delhi, March 28 | Updated: Mar 29 2006, 05:30am hrs
The Directorate General of Hydrocarbons (DGH) has charged Cairn Energy (India) Ltd with breach of trust for not getting the total oil in-place reserve estimate in its Rajasthan block RJ-ON-90/1 validated by the DGH or its management committee. Cairn has claimed that the in-place reserves were in excess of 3.5 billion barrels against its earlier estimate of 2.2 billion barrels.

In a letter to CEIL managing director Lawrence Smyth, Director General, DGH, VK Sibal said, We wish to reiterate that relevant provisions of the production sharing contract (PSC) have not been adhered to in making the disclosure. While it is true that Article 26.5 (c) of the PSC entails disclosure to FIs, Article 26.4 of the PSC also specifies that the parties shall not disclose the contents to any third party without consent in writing of the other parties.

The letter added that providing information to DGH did not necessarily imply it has been approved or vetted by it. The reserve estimate by Cairn does not represent the view of the management committee and hence is breach of contract on the part of Cairn Energy India, it said.

On Cairns claims, Mr Sibal said the DGH has consented only for an in-place reserve estimate of 1.5 billion barrels in the Rajasthan block in the development proposals of the four fields - Mangala, Aishwarya, Rageshwari and Saraswati.

Replying to Cairns letter dated March 17 that provided a break-up of oil in place, the DGH said, The oil in place reserves submitted to the management committee are for around 2. billion barrels and the remaining have been allocated to discoveries which are either not proved commercial or are yet to be appraised. Cairn must get this information approved by the management committee, it added.