India gets tough on delayed royalties

India's government is reportedly taking a tough stance against a string of oil producers, including Oil & Natural Gas Corporation (ONGC), Reliance Industries, Cairn and BG Group, for allegedly delaying payment of royalties.
"Notices have been served to the members of the two consortia operating the Panna-Mukta & Tapti (PMT) and Ravva fields for non-payment of government dues," a source from the oil ministry was quoted as saying.

Official sources were saying an audit by the Comptroller & Auditor General (CAG) found delays in payment of royalties by the PMT partners from the 1994-1995 to 2001-2002 fiscal years. According to the production sharing contract, the consortium is required to pay royalties on a biannual basis and any delay in paying it would attract a 10 % penal interest.
The government has enforced penalties against the PMT partners represented by ONGC, Reliance, and BG, while in the case of Ravva, it has directed Indian Oil Corporation to pay a lower price for the crude it buysfrom the field by adjusting the royalty that is due from the field. Partners in the Ravva consortium are ONGC, Cairn, Ravva Oil and Videocon Industries.

The PSC for PMT was signed in 1994 between the government and joint venture partners. ONGC holds a 40 % participating interest, while the balance of 60 % interest is shared equally between Reliance and BG.
The Panna-Mukta fields produced 13.3 mm barrels of crude and 1.6 bn cmpd of gas in the 2005-2006 fiscal year. The Tapti field produced 2.2 bn cmpd of natural gas during the same year.

In the case of Cairn-operated Ravva, the petroleum ministry advised Bongaigaon refinery in Assam to deduct the penalty amount (due to late payment of royalty) from the sale proceeds of the contractor in ratio of their respective participating interests. ONGC is 40 % stake holder in the field.
Cairn's interest in the field is 22.5 %, Singapore-based Ravva Oil holds 12.5 % and Videocon Industries holds 25 %. The average gross production from the field for 2007 was 60,441 barrels of oil equivalent per day, comprising average oil production of 48,078 bpd and average gas production of 74.18 mm cf per day.