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Offshore exploration firms may share security costs

Govt is expected to take a final decision next week on asking offshore oil and gas exploration companies to share the cost of security of their projects, reports Deepak Joshi.

business Updated: Oct 04, 2007 20:58 IST
Deepak Joshi

The government is expected to take a final decision next week on asking offshore oil and gas exploration companies to share the cost of security of their projects.



The exploration and production (E&P) companies will share recurring and non-recurring expenditure both in terms of capital expenditure and operational expenditure for offshore expenditure. They will share the offshore security expenditure in the ratio of their operational area.



All offshore expenditure until now is being borne by the Oil and Natural Gas Corporation (ONGC).



The offshore operation is extremely capital intensive and huge expenditure is incurred on offshore installations, officials said. In such a scenario, the sharing of costs for protecting valuable assets should not be considered a burden by E&P companies, it was pointed out.



The Petroleum Ministry had a detailed discussion on the issue with the E&P companies last month. According to the broad contours of the arrangement, ONGC will make upfront annual payment to the Offshore Defence Advisory Group (ODAG). ONGC has also suggested arresting the drift of vessels and that search and rescue operations be also included as part of offshore security.



After ONGC makes payment to the ODAG, the upstream regulator Directorate-General of Hydrocarbons will collect the subscription from all E&P operators in the ratio of their operational area as on April 1 of corresponding year and reimburse it to ONGC before September 30 of that year.



"The cost of offshore security will be shared by only those operators who are present in offshore areas for more than 180 days in the corresponding year," officials said.



The operational issues regarding offshore security will be clarified by the ODAG to all E&P companies present in Indian offshore.



"Ownership of equipment and vessels used for offshore security will be transferred to the ODAG. For this, a memorandum of understanding is expected to be signed soon between the ministry and the ODAG," sources said.

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