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BG India hopes for end to Tapti gas tussle soon

The Indian arm of Britain's BG Group said on Wednesday it aimed to double investment in India in the next five years and hoped to resolve in a few weeks a tussle over operator responsibility for the Tapti gas field.

Nigel Shaw, chief executive officer at BG India Pvt Ltd, told Reuters in a telephone interview talks in a working group set up between Tapti partners had been constructive and he hoped the issues could be cleared up without legal intervention.

An agreement between partners BG, India's Oil and Natural Gas Corporation and Reliance Industries would mark a step closer to doubling output at the Tapti development.

BG and ONGC have been locked in dispute over the lead role in running the Tapti gas field and the Panna and Mukta oil and gas fields since BG bought in February a 30 per cent shareholding in the developments from a division of bankrupt energy trader Enron for $350 million. BG has been interim operator since the acquisition.

ONGC, which holds 40 per cent of the field, also is keen to hold operatorship of the fields. Reliance owns the remaining 30 per cent stake.

"We hope we can find a mutually acceptable model in the interest of all partners and move on with the expansion at Tapti. In the next few weeks we hope to settle this," Shaw said from New Delhi.

"It's a possibility but I very much hope not," Shaw said when asked if the discussions looked set to end up in the courts.

"If we can reach agreement, we can then look at a development plan and investment in 2003 and 2004 will mean a big increment in production. Our view is that output could be at least doubled."

Shaw put current gas production at Tapti at 160 to 170 million cubic feet per day.

BG BULLISH ON INDIA

Shaw said BG had invested $500 million in the last six to seven years in India and expected that figure to double in the next five years.

As well as Tapti expansion, the company was concentrating on maintaining plateau production at the Panna and Mukta fields and exploration drilling on the CB/OS-1 licence, in which it is committed to spud three wells in 2002.

Shaw said the company had found hydrocarbons at an initial CB/OS-1 exploration well, but declined to give details. He said a second well was almost complete and a third would be spudded in a few weeks.

"We expect to be finished and have some results in a couple of months," he said, adding that BG would take about two-thirds of the gross exploration costs of about $18 million.

He said BG had put on hold the construction contract of a liquefied natural gas import terminal at Pipavav port in Gujarat while it talked to Asian and Middle East LNG suppliers.

Unlike other parts of Asia, where buyers are pressing for shorter contracts and more flexible delivery and pricing terms, Shaw said BG was talking to Middle East and Asian LNG suppliers about long-term contracts into India on a fixed price basis.

"Most gas will go to power generation and electricity customers are unwilling to take the risk of volatility in the price of crude oil, which is traditionally used in contracts as an index for LNG prices," Shaw said.

"Discussions with suppliers have been positive. I think there is a recognition that to sell successfully into the Indian market may require some changes to standard practices. The most important factor here is the ability of the end-customer to pay."

Shaw said BG saw gas demand in India rising twofold in the next 10 years.

He said the company planned to acquire geological data packages to evaluate exploration blocks up for grabs under India's third NELP exploration licensing round, which opened this week and is due to close in late August.

The company, one of the largest foreign investors in India's oil and gas sector with Cairn Energy, did not bid for any exploration acreage in the first two rounds of the New Exploration Licensing Policy.

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