Petrol Stop - Petroleum ministry to refund $120mn to Cairn India & Ravva Oil

Petrol Stop Home

Petroleum ministry to refund $120mn to Cairn India & Ravva Oil

Tuesday, 27 December 2011

28 Dec 2011;economictimes.indiatimes.com:Shuchi Srivastava:MUMBAI: The Indian government will have to refund $120 million to Cairn India and Ravva Oil, the joint venture partners operating an oil and gas block in the Krishna-Godavri basin, after Malaysia's top court ruled in their favour. "The oil ministry will have to pay close to $120 million to Cairn and Ravva," a person close to Cairn India told ET. This follows a recent Federal Court judgement setting aside a Malaysian High Court order directing Indian companies to deduct the outstanding amount of profit petroleum - the share of crude oil or gas that the government gets from operators - from the payment due to the Ravva consortium. The Ravva block, the second most valuable asset for Cairn after its Rajasthan oil fields, produces 28,000 barrels of oil and over 30 million cubic feet of gas a day. Cairn India holds 22.5% stake and is the operator of the block while ONGC holds 40% stake, Videocon Petroleum 25% and Singapore-based Ravva 12.5%. ONGC had explored and developed the Ravva field before the production-sharing contract was signed in October 1994. The legal dispute centered on the alleged short payment of profit petroleum by the consortium for past expenses incurred in the field by ONGC. These expenses were meant to be reimbursed by the other consortium partners when they bought into the field under the pre-New Exploration and Licensing Policy regime as recoverable costs while calculating the post-tax rate of return (PTRR). This had the impact of lowering the investment multiple in the field, thereby reducing the government's entitlement of profit petroleum, which the ministry protested against. In January, the Malaysian High Court issued a directive to refineries owned by Hindustan Petroleum and Bongaigaon Refinery & Petrochemicals, which lifted Ravva crude, and Gas Authority of India, which bought gas, to deduct consortium members' share of profit petroleum from the sales proceeds and remit the amount to the petroleum ministry. But this was challenged by Cairn and Rawa in the Court of Appeals, Malaysia.