Finance ministry clears Essar's Ratna-R oil fields

Essar Oil Limited (EOL) is expected to get Ratna-R Series fields with the department of economic affairs of the finance ministry clearing the proposal.

The department has written to the petroleum ministry that it "has no objection to the finalisation of production-sharing contract (PSC) with Essar Oil subject to the approval of the law ministry and compliance of the required procedure."

The matter was discussed at a meeting of the negotiating team of secretaries held here on March 25. The meeting had deliberated on a letter from Essar Group's lenders, led by ICICI, stating that all charges on Ratna-R Series fields for funding its Vadinar refinery have been withdrawn.

The finance ministry's letter said the department of economic affairs had "no specific comment on the documents submitted by Essar Oil".

Essar Oil holds 50 per cent interest in the oil fields while Oil and Natural Gas Corporation (ONGC) has 40 per cent interest. The remaining is with Premier Oil of the UK. The fields are expected to generate an annual revenue of Rs 1,000 crore.

The fields were awarded to Essar in 1995 but the production-sharing contract could not be signed because of doubts about the firm's ability to finance the project.

Sources said Essar had also agreed to the government's condition of not assigning or transferring its participating interest or exit the contract until the development plan was achieved or for a period of three years, whichever came later.

Essar Oil will also furnish a bank guarantee in the first year, based on the annual expenditure it committed to in its bid.

The company has also agreed to the government's condition that it cannot divert crude oil from Ratna field for its Vadinar refinery as it has signed a crude offtake agreement with the public sector Bharat Petroleum Corporation Limited (BPCL).

The oil fields are a series of proven discovered fields situated south of the Mumbai High basin with a proven in-place reserve of around 500 million barrels of oil and recoverable reserves in excess of 100 million barrels of and 2 billion cubic metres of gas.

The fields, whose aerial extent is 1,000 sq km, were originally discovered by ONGC. ONGC has already acquired 4,000 line km of 2-D seismic data and 8,000 line km of 3-D seismic data and more than 30 wells have been drilled in and around this area.