ONGC wins Rs 1,000 crore award in cost disputes with 3 global majors

NEW DELHI: State-run ONGC has won a series of three international arbitration awards for a total of Rs 1,000 crore in cost-sharing disputes with Petrobras of Brazil, ENI of Italy and Rocksource — now known as Pure E&P — of Norway more than a decade after the global players exited offshore exploration blocks in the Mahanadi, Krishna-Godavari and Cauvery basins.
The arbitrations were initiated between 2014 and 2016 through advocate K R Sasiparabhu. Proceedings against Petrobras and ENI were in London, while it was Delhi for Rocksource/Pure E&P — the last of the three arbitrations to be awarded in December. ONGC has moved a caveat petition in the Delhi High Court to defend the award.
All the arbitral awards were unanimous, underlining a vote of confidence in the quality of ONGC’s work execution, which was questioned by at least one of the three foreign companies to avoid sharing costs.
The disputes pertain to block MN-DWN-98/3 off the Odisha coast, KG-DWN-98/2 — which has started production recently — off the Andhra coast and CY-DWN-2001/1 off the Tamil Nadu coast. ONGC had tied up with the foreign companies for these blocks between 2002 and 2011, the time when it was venturing into the frontier area of deepwater exploration and seeking technology and expertise.
Under the sovereign contracts for the blocks, ONGC had to drill three exploration wells in each block under the minimum work programme. The cost was to be shared by the partners. All the nine wells drilled, however, came out dry. In between, the foreign partners announced their exit and refused to share costs under various pretexts, including finding fault with ONGC’s work execution.
In the arbitration against Petrobras, ONGC was given an award of $50 million with interest against a claim of $60 million. The award in case of ENI was $20 million with interest against a claim of $33 million and in case of Pure, the arbitration gave ONGC the full amount of $20 million — altogether worth over Rs 1,000 crore.

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