GAIL & Hardy Fight to Retain CY-OS/2 Off Chennai

GAIL and Hardy Exploration are fighting hard to retain block CY-OS/2 offshore Tamil Nadu despite being formally asked by the DGH to relinquish control.

On August 26th, GAIL chairman Proshanto Banerjee wrote to the oil ministry repeating the consortium's request for an 18-month extension to the Phase-III work program at CY-OS/2 that officially ended on January 15th this year. Banerjee's letter comes despite a formal notification from the DGH on June 9th that the consortium's request for an extension to Phase-III had been turned down. In its letter the DGH also asked the GAIL-Hardy consortium to formally relinquish the block and pay ONGC (the licensee) costs related to the unfulfilled Phase-III minimum work program.

Undeterred, GAIL responded with a letter from Banerjee, that has divided the ministry. One section feels that Hardy deserves an extension because of its good track record but another section feels this case should not receive an extension, despite the high-profile intervention of Banerjee.

Despite this, we understand the ministry is still examining the issue. Adds a source: "We've never had to deal with a case like this before." So far the consortium has received no formal response to Banerjee's letter. GAIL and Hardy plead they suffered a 22-month delay through no fault of their own. "We had to wait for ONGC data as well as the various permissions," says a source. "The time that we lost adds up to 22 months but we are only asking for an 18 month extension."

Hardy is confident the government will see reason and not ask it to relinquish control. "We did not exceed the time limit for each phase," adds Hardy. "The time was borrowed from the subsequent phase. In fact the total time of 7 years for the license was shortened by 22 months. This is our major argument to have an extension of at least 18 months."

If it gets the 18-month extension, the CY-OS/2 consortium plans to shoot additional 300-sq km 3D at a cost of about $4m. Also planned is one exploration well. Hardy has already drilled one well during the exploration period, which yielded non-commercial traces of gas. The PSC for this 2498-sq km Cauvery offshore basin block was signed in November 1996 and GAIL farmed-in in 2002.

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