Royalty issue: ONGC refuses Cairn stake

Oil and Natural Gas Corp ONGC will not acquire 30 per cent stake in Cairn Energy8217;s recent Rajasthan oil find if the government did not exempt it from paying royalty on the British firm8217;s share of crude oil.

ONGC, which has the right to take 30 per cent equity in any oil and gas find in the Rajasthan block, is liable to pay 20 per cent royalty not only for its own share of production, but also of Cairn Energy. 8220;Over the life of the field, we will pay over 1 billion in royalty, much more than what a 30 per cent stake would entitle us,8221; a top company official said.

If ONGC exercises its 8217;walk-in rights8217;, it will have to contribute 30 per cent of the cost of developing Mangala and Aishwariya oil fields, targeted to produce between 80,000 and 100,000 barrels per day from 2007-end. It would be entitled to 30 per cent of the crude oil produced but will pay 20 per cent royalty on the entire crude oil produced. The Petroleum Ministry is pushing ONGC into sharing Cairn8217;s cost of developing the Rajasthan field even if it meant huge losses. 8212;PTI