Oil and Natural Gas Corp has been forced to exit a gas block in Trinidad and Tobago after its partner, Lakshmi N Mittal, walked out of the project.
"The Cabinet Committee on Economic Affairs (CCEA) today granted ex-post-facto approval for withdrawal of ONGC Videsh Ltd (the overseas arm of the state-owned firm) from North Coast Marine Area-2 (NCMA-2) project in Trinidad and Tobago," Home Minister P Chidambaram told reporters here.
ONGC-Mittal Energy Ltd -- the joint venture of OVL and Mittal Investment Sarl -- had in 2007 won offshore block NCMA-2, which is estimated to hold in-place reserves of two trillion cubic feet of gas, beating Britain's Centrica Plc.
But last year, MIS, the holding company of the Mittal family's interest, decided to exit the project because of the global economic meltdown.
"Considering all aspects of the situation and the then depressed markets, OVL came to the conclusion that in the absence of MIS, it would not like to continue on a 100 per cent standalone basis with an estimated expenditure of $304 million," he said.
OMEL had 65 per cent interest in the block, while Trinidad and Tobago's state-owned oil firm, Petrotrin, had the remaining stake.
Under the initial agreement, OMEL was required to "carry" Petrotrin during the exploration phase, which means it had to contribute towards Petrotrin's share of investment.
After the exit of MIS, OVL -- the overseas investment arm of ONGC -- would have to foot the entire $304 million exploration expenditure, with Petrotrin not willing to share any risk.
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Chidambaram said OVL tried to get an international energy firm as partner but did not succeed, so it had no option but to exit the block after incurring an expenditure of about $1.05 million.
After the exit of MIS, companies like Centrica, RWE Dea Ag of Germany, BG Group of UK and Spain's Repsol had expressed interest in partnering OVL, but subsequently withdrew, he said.
Also, there were differences between OVL and Petrotrin over treatment of disallowed costs in the exploration block. OVL wanted the disallowed cost to be shared by Petrotrin, but the issue could not be resolved, he said.
OMEL had also committed to pay a signature bonus of $30.1 million for the acreage, but this was never paid as the Production Sharing Contract (PSC) was not concluded.