GAIL Owes No Additional Drilling Costs for Myanmar Well

GAIL India said it will not have to pay a larger bill as penalty for not contributing to the drilling cost of the successful sidetrack well that resulted in discovery of 4 to 6 trillion cubic feet of gas in offshore Myanmar.

The two Indian partners -- ONGC Videsh Ltd and GAIL who together hold 30 percent interest in the A-1 gas block in Bay of Bengal -- had not contributed their share in drilling of the Shwe-1 sidetrack well.

The well, which discovered a field with estimated reserves of between 4 trillion and 6 trillion cubic feet of gas, was drilled at sole risk by South Korea's Daewoo and Kogas.

"Neither ONGC Videsh and GAIL have a larger bill to pay as a penalty than if they had participated at the time of sidetrack," GAIL said in a press statement.

Gail said the Indian partners had participated in the entire drilling and testing program of Shwe-1 and only sidetracked well drilling was done by Daewoo and Kogas.

Stating that here is no penalty imposed on GAIL and OVL, the company, however, admitted that "the sole risk parties, Daewoo and Kogas, can recover the cost for the sole risk operation a few times more than the actual spending, which is quite common in many joint operations."

While Daewoo holds 60 percent stake in block A-1, Kogas has 10 percent. OVL, the overseas arm of Oil and Natural Gas Corp (ONGC), has 20 percent interest and the remaining 10 percent is held by GAIL.

Both Myanmar and Daewoo view India as a potential market for the gas discovered in A-1 field and so they are keen on OVL and GAIL continuing in the consortium.