Cairn India moves Delhi HC seeking refund of operating costs of Ravva oil field

Cairn India seeks refund of costs it had paid on behalf of Videocon Industries for operation of the Ravva oil field in the KG basin


Arguments on behalf of Cairn India will continue at the next hearing on 14 September. Photo: Reuters
Arguments on behalf of Cairn India will continue at the next hearing on 14 September. Photo: Reuters

New Delhi: Cairn India Ltd moved the Delhi high court on Thursday seeking a refund of costs it had paid on behalf of Videocon Industries Ltd for operation of the Ravva oil field in the Krishna-Godavari (KG) basin in Andhra Pradesh.

The dispute arose out of a default by Videocon over the years in making payment towards operating costs of the oil field under a production sharing contract (PSC) with Cairn, the operator of the oil and gas field.

Justice Manmohan Singh asked Videocon Industries to submit its books to be able to assess the issue of non-payment of costs by the company.

The Ravva oil and gas field is being developed in partnership by Cairn India, which has a 22.5% participating interest, Oil and Natural Gas Corp. (40%) and Videocon and Ravva Oil, with 25% and 12.5% interest, respectively. The PSC under which the oil field is being developed by the four companies is valid until 2019.

The four companies are required to invest towards operation of the oil field and default in payment by any of them is to be borne by the rest as per their participating interest.

“If one company defaults in making a payment towards operating cost, other non-defaulting companies must contribute to meet the shortfall.” Aryama Sundaram, counsel appearing for Cairn, said.

He added that ONGC and Ravva oil had failed to respond to cash calls by Cairn and could not shy away from sharing the burden due to default on Videocon’s part. If they fail to do so, it would make them defaulters, he said.

Arguments on behalf of Cairn India will continue at the next hearing on 14 September.

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