Oil and Natural Gas Corporation (ONGC) will not acquire the 30% stake it is entitled to in Cairn Energy's recent Rajasthan oil finds if the government did not exempt it from paying royalty on the British firm's share of crude oil. ONGC is liable to pay 20% royalty not only for its own share of production, but also of Cairn Energy.If ONGC exercises its 'walk-in rights', it will have to contribute 30% of the cost of developing the Mangala and Aishwariya oil fields, which are expected to produce between 80,000-1,00,000 barrels per day from the end of 2007.It would be entitled to 30% of the crude oil produced from the fields, but will pay 20% royalty on the entire crude produced from them."Over the life of the field, we will pay over $1 billion in royalty - much more than what the 30% stake would get us," a top company official said today.The ministry of petroleum and natural gas is pushing ONGC to share Cairn's cost of developing the Rajasthan field even if it meant huge losses for the state-run firm. "It is contemplating issuing a Presidential directive if ONGC deters," a government official said.
