Wednesday, November 10, 2010

Oil Min to defend Canoro PSC termination at Delhi HC this week

The petroleum ministry’s petition to the high court here for a go-ahead on its earlier termination of a production sharing contract involving Canoro Resources of Canada for an Assam oil block will be heard on Friday.

In August-end, the ministry had terminated a contract between Canoro and Assam Company India Ltd (ACIL) for the oil block. This was the first termination of a PSC in the Indian oil and gas industry.
The ministry cited the PSC in saying the decision was 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.
Canoro challenged the termination at the Delhi high court; it got an interim order of restraint on the petroleum ministry from appointing a new contractor. "We have filed a petition seeking the vacation of this order," said a government official.

The development is analogous to the Cairn-Vedanta case involving the ministry. Cairn Energy initiated a process, around the same time, to sell between 40 and 51 per cent stake in subsidiary Cairn India — operator of the nation’s largest onland oilfield — to London-listed Vedanta for $6.65-8.48 billion. The government is yet to give approval and has said its permission for the deal should have been taken first, something Cairn contests.

The Amguri field in the Assam block produces about 1,000 barrels of oil equivalent per day (boe) and is estimated to have proven and probable reserve of oil condensate and gas of 12.287 million boe. In the case of Cairn India, the stakes are much higher, with average crude oil production from its Barmer block being 120,000 barrels a day. Cairn is also operator of the Ravva oil and gas field and the Cambay Basin (CB/OS-2), which produces 37,043 and 13,527 barrels of oil equivalent per day.

The ministry had on June 1 issued a showcause notice to Canoro for raising C$95 million in April through a mix of debt and equity from Barbados-based Mass Financial Corp, without the "required consent" of the government. Mass 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.


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