Stalled oil exploration: Govt to talk with Texana, Cairn

KATHMANDU, AUG 23 -

Three months after Texana Resources Company and Cairn Energy stopped oil exploration work citing a force majeure situation, the government has called them for talks to sort things out. According to the Department of Mines and Geology (DoMG), meetings will be held with Cairn on Aug 28 and later with Texana.

“We have asked them to come for a dialogue,” said Sarbajit Mahato, director general of the DoMG. “We will try to resolve all the issues with them and come up with a concrete decision.”

DoMG officials said that the planned meetings would decide the ‘fate of these two companies’. Texana and Cairn could lose or retain their oil exploration licences depending on how the talks go.

Texana and Cairn, of the US and the UK respectively, had halted exploration work from the first week of June announcing a force majeure due to bureaucratic hurdles and lack of cooperation from the government. Force majeure frees a party from fulfilling an obligation in the event of circumstances beyond its control.

However, officials at the Ministry of Industry and the DoMG said that their decision to invoke force majeure was one sided, and that the companies had not been performing well since the beginning. “These companies have made no progress in their assigned tasks,” said a high-level official at the department. He added that the meeting had been called to end the confusion. “The two companies, however, have not responded to the department’s request.”

This is not the first time that Texana and Cairn have invoked force majeure. They have halted work in the past citing volatile political and security situation, said the official. “We cannot tolerate their negligence any longer,” he added.

Both the companies have already spent millions of dollars in Nepal on preliminary surveys and were now all set for a ‘seismic operation’ which determines whether the surveyed areas contain commercially viable quantities of oil. To date, Texana has spent US$ 3 million and Cairn US$ 20 million in the country.

The two companies pay an annual fee of US$ 50,000 per block to the Nepal government. They have also deposited US$ 400,000 each as bank guarantees.

Texana had won the bid for Blocks 3 (Banke) and 5 (Chitwan) and entered into an agreement with the government in December 1998. While Cairn received a licence to explore five other blocks-Block 1 (Dhangadhi), Block 2 (Karnali), Block 4 (Lumbini), Block 6 (Birgunj) and Block 7 (Malangawa) six years later.

Meanwhile, a high-level source at the Industry Ministry said that despite these companies doing nothing remarkable, the government cannot take instant action against them. “There were some mistakes on Nepal’s side while signing the agreement with them,” said the official. “For example, the pact has given the companies liberty to impose force majeure one-sidedly.” He added that despite this fact, the government would hold talks with them.

A Cairn official said that the company was waiting for the talks and wanted to reach a final decision. He added that the company would not resume work until the government fulfilled its commitment made while signing the agreement. “The company is not interested in holding the licence and being in a dilemma,” he said.

Source: The Kathmandu Post