Oil ministry may settle ONGC dues

PSU to get paid on behalf of its joint venture partners by profit petroleum transfer.

The petroleum ministry will seek the Cabinet approval for reimbursing statutory payments made by ONGC on behalf of its joint venture partners by transfering profit petroleum to it.

While dues to Oil and Natural Gas Corporation on this account stood at Rs 283 crore at the end of March 2005, they could rise to Rs 6,000 crore once the Cairn Energy-operated block in Rajasthan becomes operational from next year.

The government had signed 27 production-sharing contracts (PSCs) prior to the New Exploration Licensing Policy. Under the PSCs, national oil companies, ONGC and Oil India, are liable to pay all statutory levies, including royalty and cess, on behalf of companies which have signed the contracts.

ONGC has only 40 per cent stake in PY-3 and Lakshmi. It pays cess and royalty not only on its own share of production, but also on the share of other partners. While the private sector partners do not pay any cess and royalty on crude, ONGC has to pay cess at Rs 1,800 per million tonne on 100 per cent production.

A group of ministers had earlier recommended that the government should compensate national oil companies for actual liabilities undertaken by them by transferring profit petroleum of the government.

ONGC's claims till March 2005 were Rs 282 crore for the existing producing field, but for Mangala operated by Cairn Energy in Rajasthan, ONGC would have to pay over $1 billion in royalty over the life of the field. This is much more than what a 30 per cent share in oil production will fetch the company.

The draft note for the Cabinet had suggested that ONGC should be reimbursed cess and royalty paid by it on behalf of others from the profit oil accruing from the concerned field.

ONGC represented against the proposal stating that the condition would limit the possibility of reimbursement, especially from those fields where profit oil was neither accruing at present, nor had the possibility in the near future due to significant investment planned for such fields.

ONGC wanted that the reimbursement should be allowed from the pool of profit oil accruing to the government from all the fields. Profit petroleum is the share which the government gets in production from a field after its cost has been recovered.

ONGC also sought waiver from payment of royalty arrears for 1998-2002 in respect of pre-NELP blocks awarded to private companies. The waiver was earlier granted for only nomination blocks.

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CLEARING DUES

ONGCs current dues on this account stood at Rs 283 crore at March end. Dues may rise to Rs 6,000 crore after the Cairn Energy-operated block in Rajasthan becomes operational next year

Under production-sharing contracts, national oil companies have to pay all statutory levies on behalf of companies which have signed the contracts