Having failed to kick start exploratory activity in its shallow water oil block situated near Andhra Pradesh coastline over the last six years owing to objections by the Department of Space, State-run explorer ONGC and Cairn India (who jointly operate the reserve along with Tata Petrodyne ltd) have approached the Cabinet Committee on Investment (CCI) to expedite clearance for it.
The consortium, according to sources, has incurred $30.8 million on the block till July 30, 2013 and in the last two years there has been no effective exploration activity in it. This has led the hapless consortium members to seek CCI's intervention and the Prime Minister Manmohan Singh-led body is likely to take a call on the matter during its meeting scheduled for December 19.
The block, which is technically titled PR-0SN-2004/1, is stuck mainly due to strong objections from the Department of Space, which notified a large portion of the block as a prohibited zone. Its main objection was that owing to drilling work and 2D as well as 3D seismic activities, there is an increasing risk of radio frequency interference taking place apart from debris falling.
The total exploration period of the block was seven years out of which the first phase of exploration was for a period of four years (between April 2007 to April 2011). During the first phase, the consortium was supposed to drill three exploratory wells, however after the area was declared as a prohibitory zone, the work could never take place.
Though after the intervention of the Petroleum Ministry, the Department of Space had allowed it to carry out planned exploration after fulfilling certain conditions, ONGC and Cairn India want CCI to relax these stringent conditions and also shift the northern boundary of the prohibited zone, so that they can start the exploration work.
According to information available with The Pioneer, the consortium has said that once the clearance is granted by the CCI, a positive signal would be sent out to global entities which are involved in exploration and production (E&P) activities, and they will be encouraged to continue their operations in India.
The Department of Space on its part had laid down stringent conditions for the consortium and discouraged it from exploring the block as it is situated quite close to Sriharikota in Andhra Pradesh, which being the hub for Satish Dhawan Space Centre (which is an important satellite launch centre), is a sensitive zone in terms of national security. The consortium though plans to raise the investor-friendliness pitch while presenting its case before the CCI.
According to sources privy to the development, the consortium is learnt to have mentioned in its presentation before the CCI that owing to lack of exploratory activities, it stands to face huge financial penalties as per contract obligations. Also the denial of permissions to exploit the block, may lead to litigations and this would have an adverse impact on the investment environment in times to come. The global entities involved in E&P activities in India, may feel discouraged and could discontinue their operations in the country, thus leading to a loss of face for the Government, the consortium's note to the CCI claims.
The consortium is also said to have mentioned in their presentation for the CCI meeting that since the region where the block is situated (Palar offshore) is relatively new for exploratory activities, it has huge potential for attracting investors in future and therefore any stringent action by the Government may have long standing repercussions. ONGC and Cairn India have 35 per cent stake each in the block while TPl has the remaining 30 per cent share in it.