ONGC seeks Nelp royalty repayment

NEW DELHI: India���s largest oil & gas explorer Oil & Natural Gas Corporation (ONGC) has asked the government to implement recommendations of the committee of secretaries��� (CoS) decision that provides for reimbursement of royalty paid by the company on behalf of its partners for producing crude oil from pre-new exploration licensing policy (Nelp) blocks. The CoS��� decision, taken four years ago, is awaiting the Cabinet���s nod, said a senior official in ONGC.

ONGC chairman & managing director RS Sharma confirmed the development. ���We have written to the government for resolving the issue for all pre-Nelp blocks expeditiously,��� he told ET.

ONGC, as the government nominee, holds licences for all the pre-Nelp blocks and, thus, it is liable to pay all statutory levies like royalty.

Commenting on market buzz that ONGC may exit from Cairn India���s (CIL) Rajasthan oil field, Mr Sharma said: ���We are not exiting from any field, including Cairn���s Rajasthan field.���

ONGC���s demand for reimbursement of royalty assumes significance, as its partner CIL is all set to produce crude oil from the Rajasthan pre-Nelp block. Immediately after the production of oil from the block, ONGC will have to pay 20% of its value as royalty.

While ONGC holds only 30% stake in the block and balance 70% is held by Cairn, it will have to pay even CIL���s share, which is estimated around $350 million every year. Mr Sharma didn���t confirm the figure.

���It is more important to decide this issue now, as the board (of ONGC) is to approve the field development plan (FDP) for oil production from Rajasthan oil field,��� he said.

ONGC needs its board approval to contributes 30% of about $2.4 billion expenditure in producing oil from Rajasthan field. Cairn is set to produce about 30,000 barrels a day of crude oil from the field in the third quarter of the calendar year 2009. Production will reach a peak at 175,000 barrels a day in 2011.