Terror Cost

TOI

Sanjay Dutta,TNN

Private oil companies on undersea oil hunt will have to share the government's cost of providing security to men and infrastructure such as floating platforms and specialised vessels they deploy off India's shores.

The government's decision comes in the wake of mounting terror threats, which have made guarding the country's offshore assets an expensive proposition as more and more firms set sail in search of hydrocarbons treasure.

So far, only state-owned explorer ONGC has been chipping in with expenses incurred by defence forces for securing the seas and airspace around offshore installations like those anchored around the Mumbai High cluster of fields.

Now, private companies which are pumping or hunting for oil/gas will have to share the costs in ratio of their area of operation.




"The number of companies operating in offshore areas has risen considerably after six rounds of the government's acreage auctions. This means a huge exposure as offshore operations take huge investments that need to be secured. Besides terror or military threats, security also includes steps taken to ensure safety and avoid accidents from, say drifting ships hitting platforms," an oil company executive said.

The oil ministry will notify the decision in a month, which will be effective from April 2007. To start with, ONGC will pay upfront the entire oil industry's burden of the security expenses every year.

The companies operating in offshore areas will then pay their share to the flagship explorer through the Directorate General of Hydrocarbons, the regulator for exploration firms. However, only those firms which have deployed men and machines for six months will have to share the security costs.

Though private companies agree with sharing security costs, they want this to be treated as part of expenses towards starting commercial production from oil/gas fields. If government accepts the suggestion, it will allow them to recover share of security costs from revenues earned from hydrocarbons. While the jury is still out on this aspect, the government will make changes in the oilfield contracts to enable DGH to collect share from private companies operating in offshore areas.

At present, security of coastal or high-sea oil operations is dealt with through the Offshore Defence Advisory Group. ONGC spent Rs 27.5 crore on installing a vessel and air tracking system and spends Rs 1.26 crore every year on establishment cost of the group. All these and future recurring costs will have to be shared by private firms.