In a fresh twist to the first-ever termination case of a production sharing contract (PSC), the government has submitted before the Delhi High Court that Canadian company Canoro Resources has caused “irreparable damage” to the reservoir at Amguri oilfield in Assam.
The petroleum ministry made the allegation in a fresh affidavit. “We found it crucial to bring it to the court’s notice before a decision was announced,” said the government lawyer. The court had reserved its judgement after the hearing of the case concluded in December. The matter will come up before the court tomorrow.
A team sent by Directorate General of Hydrocarbons, India’s upstream oil regulator, has found that the operator has not followed good international practices which has caused irreparable damage to the reservoir. This, according to sources, will affect productivity of the wells and lead to loss of revenue to the Union and Assam governments.
“The continued production from the Barail Main reservoir below dew point pressure has led to condensate drop out of 551,000 barrels in the reservoir during last two years,” said a report submitted before the court.
The team has claimed that there had been a cost overrun in the project and a delay of 18 months in executing gas compression and condensate stabilisation project that was scheduled for commission in June 2009. The team has expressed doubt about Canoro’s technical capability to effectively manage the Amguri field and the PSC as an operator.
The Amguri field in Assam was producing about 1,000 barrels of oil equivalent per day (boe) before its closure on December 3, 2010. 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. The pre-Nelp block, abandoned by Oil and Natural Gas Corporation, was held jointly by Kolkata-based Assam Company India Ltd (ACIL) and Canoro.
In August-end last year, the petroleum ministry had terminated the PSC between Canoro and ACIL for the oil block in Assam. This was the first termination of a PSC in the Indian oil and gas industry’s history.
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The move came soon after Cairn Energy initiated a process to sell between 40 and 51 per cent stake in its subsidiary Cairn India – the nation’s largest onland oilfield operator – to London-listed Vedanta for $6.65-8.48 billion. The government filed a petition against the injunction from termination sought by Canoro at the court.
The termination, the petroleum ministry claimed, was justified due to a change in the shareholding pattern of Canoro. Canoro owned 60 per cent and was the block operator, with ACIL holding the balance 40 per cent. In April, Canoro raised Canadian $95 million through a mix of debt and equity from Barbados-based Mass Financial Corp, without the ‘required consent’ of the Indian 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 of the oil block and has three out of five directors on the board.