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Misleading the govt?

The oil regulator, Directorate General of Hydrocarbons , has charged the Australian oil and gas company, Santos International of "incorrect practices" and for "misleading the Indian government" in its attempt to wriggle out of its work commitments in two Bay of Bengal exploration blocks, reports Anupama Airy.

business Updated: Feb 22, 2009 20:29 IST
Anupama Airy

In what could set a precedent for many oil and gas companies operating close to international borders, the oil regulator, Directorate General of Hydrocarbons (DGH), has charged the Australian oil and gas company, Santos International of "incorrect practices" and for "misleading the Indian government" in its attempt to wriggle out of its work commitments in two Bay of Bengal exploration blocks.

Santos, a mid-sized company, was awarded the two blocks in April, 2008 under the sixth round of offering oil and gas exploration blocks.

Speaking to Hindustan Times, DGH director general, VK Sibal said, Santos has been "wrongly citing" repeated interruptions by the Bangladesh Navy for disruption of operations in these blocks.

Ministry of Defence guidelines say all companies operating close to international boundaries are expected to keep compliance or log reports, which would have indicated any such interference. However, Sibal said, "No such report was ever made available to the DGH despite repeated requests."

Sibal said Santos had first reported on disruptions and interference by the Bangladesh Navy in early January. The DGH immediately took it up with the authorities concerned, including the ministries of petroleum, foreign affairs and defence. "I even personally spoke to the head of the Indian Coast Guard as also to the officials of Navy," he said.

According to DGH, Santos decided to de-mobilise its operations despite assurances by the Indian ministry of external affairs that the Indian Navy was positioned close to the blocks to provide adequate security cover, and it should continue with its work.

"Without informing the DGH, Santos decided to cease its operations in the blocks from February 11," Sibal said.

Despite repeated attempts, HT was unable to reach the Santos officials in India. However, in an earnings conference call and webcast on February 18, David Knox, chief executive officer and managing director, Santos told analysts: "In Asia, we have almost completed the scientific surveys in the Bay of Bengal."

In fact, Santos told its investors that "seismic surveys in the 4,000 sq km area of these blocks have been completed." These are "very exciting blocks" and are seen as "long-term game changer for Santos."

So, what really happened? After deciding to cease operations on February 11, a team of Santos officials met Sibal on February 17 to inform him of their decision.

Sibal wrote to Santos on February 19 saying, "Santos' unilateral cessation of ongoing seismic operations is not appreciated." As the DGH was not kept in the loop when the company decided to cease its work operations in the blocks, "we have decided that no cost recovery will be allowed to Santos for the expenses incurred by it while mobilising or demobilising," Sibal added in the letter.

"It was actually a goof up on part of Santos than anything else," Sibal said. "They want to exit out of these blocks and had already approached many companies like ONGC, Reliance, BG, ENI and OIL for selling their stake. And this is why they are making out-of-place excuses to cease their operations."