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Cairn India stops ops in 2 blocks on govt's objections

14 Nov 2011 Evaluate

Cairn India has stopped operations in two blocks during thesecond quarter ended September 30, due to constant intervention by the Ministryof Defence (MoD). In the KG-OSN-2009/3 and MB-DWN-2009/1 blocks, force majeuredeclared by Cairn India has been accepted by the Directorate General ofHydrocarbons (DGH) in view of the denial of Defence clearances to carry outseismic surveys. Henceforth, the operations in thetwo blocks have been stopped in the July-September quarter.

Force majeure is a common clause in contracts thatessentially frees both parties from liability or obligation when anextraordinary event or circumstance occurs beyond the control of the parties. Cairnhas requested the DGH assurance that it will receive free and continuous accessto the entire block and carry out the planned 3D seismic survey for sixexploratory wells in initial phase. However, as there was constant interventionby the MoD in both the blocks, the oil major opted for force majeure which theDGH permitted. The company is in the process of seeking environmental clearanceto enable acquisition of a 2D survey during the first quarter of 2012.

While KG-OSN-2009/3 block lies in Krishna-Godavari basin,MB-DWN-2009/1 block is in the West Coast. Cairn already has one block (Pallarbasin block PR-OSN-2004/1) under force majeure. The Production SharingContract was signed in June, 2010 and the Petroleum Exploration Licence (PEL)was granted in August, 2010 for both the blocks The Director General ofHydrocarbons recommended Force Majeure to block KG-OSN-2009/3 because frequentMoD intervention in the block.

Peers
Company Name CMP
ONGC 279.25
Oil India 454.40
Jindal Drilling&Inds 535.85
Deep Industries 457.70
Asian Energy Service 297.85
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