The government has been making the final preparations to terminate the licences of two companies prospecting for oil in Nepal—BBB Champion and Emirates Associated Business Group (EABG).
The Ministry of Industry (MoI) said that it was forced to act as the two companies had not been responding to its repeated letters to clearly state their position. BBB Champion and the EABG entered Nepal in 2012.
A meeting of the Petroleum Advisory Board (PAB) slated to commence on October 17, 2014 will reach a final decision on terminating their permits, said Industry Minister Mahesh Basnet.
“There is no point in continuing the licences of companies that have not made any work progress,” said Basnet. “Nepal has immense potentiality. The country should not get involved in petroleum politics. The decision made by the PAB will be endorsed formally by the Cabinet.”
The government has divided the Tarai and the Siwalik hills into 10 “exploration blocks” of 5,000 sq km each as being potential oil fields. It had awarded Block 10 situated in Biratnagar to US-based BBB Champion and Blocks 8 and 9 in Janakpur and Rajbiraj to the EABG.
After around two years of their being awarded the exploration licences, BBB Champion disappeared from radar while the EABG asked for its permit to be cancelled, said officials of the Department of Mines and Geology. The EABG
too dropped out of sight after the government asked it to fulfil its liabilities.
“These companies have stopped operations by invoking force majeure and have been ignoring our frequent correspondence,” said MoI Joint Secretary and Spokesperson Yam Kumari Khatiwada. According to her, both the companies will have to fulfil several liabilities including financial liabilities even if the contract is terminated.
Realizing that the case might also go into arbitration, a study is being undertaken to find out the liabilities the government will have to fulfil. Khatiwada said that a sub-committee headed by the law secretary had advised the PAB to scrap the licences if the companies failed to respond to the government’s notices. The decision to cancel the permits was based on this recommendation.
Meanwhile, two other companies, Houston-based Texana
which holds the exploration licence for Blocks 3 and 5 (Banke and Chitwan) and Scotland-based Cairn Energy which holds the licence for Blocks 1, 2, 4, 6 and 7 (Dhangadhi, Karnali, Lumbini, Birgunj and Malangwa), too are likely to face government action. Texana has written back to the MoI that it will hold talks in October this year.
“These two companies too do not seem to be much enthusiastic about continuing their tasks. And they are under review. Since they seem to be willing to hold talks, we have not rushed to make a decision,” Khatiwada said.