Govt mulls cancelling licences of oil cos

KATHMANDU, JAN 18 -

The Ministry of Industry (MoI) is “considering” terminating the petroleum exploration licences issued to four oil companies if they fail to furnish a convincing clarification for “slow progress” in exploration work.

A meeting of Petroleum Advisory Board under the ministry held in the third week of December, 2013, had decided to seek clarification from the oil companies.

The Department of Mines and Geology (DoMG) has written to the four companies—Texana Resources, BBB Champion Company, Cairn Energy and Emirates Associated Business Group (EABG)—asking them to make it clear their Nepal operations. The companies have been given 30 working days to respond.

“We have not decided yet, but we are seriously thinking about terminating their contracts if they fail to furnish a convincing reply,” said Industry Secretary Krishna Gyawali. “If their reply fails to convince us, we will move ahead with the licence cancellation."

The ministry is of the view that the companies can leave Nepal if they are not interested in exploration work here. “We found they are not serious about taking the exploration work ahead, but are only holding the licence,” said Gyawali. “There is no point asking these companies to stay, if they don’t want to carry out the work for which they received the licences.”

MoI officials said the government has received a report prepared by a team headed by the law secretary to make sure that the government fulfils all legal procedures before terminating the licenses. The ministry will call for a fresh tender after scraping the licenses.

Of the four companies, Cairn Energy has already pulled out from Nepal. Cairn, a Scottish oil and gas company, which that had received the permit to drill for oil 10 years ago, shut down its Nepal office, citing “slow bureaucratic process” and “the government’s indifference” six month ago.

According to former Cairn officials here, the company had informed the department about its decision to leave.

However, DoMG Director General Sarbajeet Mahato said the companies can pull out from Nepal only after clearing their “liabilities”. “The agreement between the government and the companies does not allow them to leave the project halfway. The only way to pull out is by termination, which is done after the companies fulfil their liabilities,” said Mahato.

The entire petroleum exploration scenario has been characterised by the oil companies’ delay tactics and the government’s apathy. The Tarai and Siwalik hills have been divided into 10 “exploration blocks” of 5,000 sq km each as being potential oil fields. Texana Resources won the bid for Blocks 3 and 5 (in Banke and Chitwan) and entered into an agreement with the government in December 1998.

Six years later, the country’s petroleum exploration bid was further bolstered when Cairn received a licence to explore

five more blocks—Blocks 1, 2, 4, 6 and 7 (Dhangadhi, Karnali, Lumbini, Birgunj and Malangawa respectively).

In July 2012, two more companies entered Nepal. The government awarded three petroleum exploration blocks to US-based BBB Champion Company and Dubai-based Emirates Associated Business Group (EABG). BBB got Block 10 (Biratnagar) while EABG was given Blocks 8 and 9 (Janakpur and Rajbiraj).

However, no substantial progress has been made in the petroleum exploration so far. Citing “unfavourable environment”, oil companies (mainly Cairn and Texana) have invoked force majeure and remained idle while the government has been equally lethargic, neglecting to address their genuine issues or forcing them to get on with their task. The entry of Cairn and Texana coincided with the escalation of the Maoist conflict, forcing them to remain idle during the conflict period.

One of the ironies in the country’s petroleum exploration efforts is that relations between the government and the oil companies have never been smooth. The oil companies, frustrated by the way of operation of the Industry Ministry and the DoMG, have accused them of not fulfilling their commitments. The government, on its part, said the companies never showed any seriousness even when the ground environment improved for them to start exploration work.

Ministry officials have charged the companies with not responding to their correspondence. In fact, two new companies, according to the DoMG, have been out of contact after acquiring the licences. “We are planning seek take help from the American embassy in Nepal to locate BBB,” said Gyawali, adding EABG is also out of contact.

(Source: The Kathmandu Post)