Failing Def Min clearance, ONGC may invoke 'force majeure' for two KG Basin blocks

Oil and gas major Oil and Natural Gas Corporation (ONGC) said on Thursday that three of its KG Basin NELP blocks have run into a roadblock following restrictions from the Ministry of Defence, and it may invoke force majeure clause for two of those.

Force majeure is a clause in contracts which frees the parties from liability/ obligation on account of extraordinary event or circumstance beyond the control of the parties.

These two blocks were awarded in the 8th round of the government’s National Exploration and Licensing Policy (NELP) to ONGC and Andhra Pradesh Gas infrastructure Corporation.

S.V. Rao, Director (Exploration), said ONGC was awaiting the response of the Director General of Hydrocarbons on the issue.

“We believe there is no resolution at this point of time. Like Cairn has done in the other blocks, we will invoke force majeure,”Rao said at a press conference in Hyderabad. “We will have to wait for the response from the DGH. They said they are trying to resolve the issue.”

According to a senior official of APGIC, though the seismic survey was conducted in the two blocks, ONGC could not proceed as the Defence Ministry was yet to give its go-ahead.

As for the third block, Rao said the Defence Ministry had indicated it would give conditional clearance. "We received a communication just (a) fortnight ago from the DGH where they have indicated they are actively considering,” he said.

Defence Research and Development Organisation (DRDO), which comes under the Defence Ministry,, had earlier requested the oil ministry to limit operations in the KG Basin as it is in the vicinity of the missile testing range.

The oil ministry had requested DRDO to shift the testing range but the impase is yet to resolved. Sudhir Vasudeva, Chairman and Managing Director, ONGC,said that the G1 offshore block of the company in KG Basin may go for production in the first quarter of fiscal 2013.

He said capex for the 12th plan involves Rs 1.64 lakh crore in investment, with 35 to 40 per cent for survey and exploratory drilling, 35 per cent for greenfield and brownfield projects, and balance on development drilling. Research and development will account for one per cent.