No reason to compensate NOPEC says SEMA

A state agency, the Strategic Enterprise Management Agency (SEMA) has expressed serious concern over the decision by the Petroleum Resources Ministry to pay US$ 10 million as compensation to a Norwegian company which was asked to terminate its contract on oil exploration work off the northwest coast.

The deal included the Non-exclusive Seismic Data Agreement between TGS-NOPEC Geophysical Company ASA and the Ceylon Petroleum Corporation (CPC).

The agreement was signed in 2001 to conduct research on potential oil resources in the country. Petroleum Resources Minister A.H.M. Fowzie announced on Thursday that a decision had been made to exit the agreement with the payment of US$ 10 million as compensation. SEMA, an agency set up to ensure that state organizations get the best commercial benefit from contracts and agreements, is strongly opposing this move and is of the view that TGS-NOPEC is in breach of contract and instead it is the NOPEC that owes money to the Sri Lankan government and not the other way round.

The original agreement stipulated that NOPEC would conduct 2D and 3D surveys of the different basins, yielding undersea images thus assisting the CPC to block out sections to be sold to oil exploration companies.

The information provided by the surveys is of particular importance because it determines the pricing of the blocks.

“So far NOPEC has conducted 2D surveys only of the Mannar Basin,” a SEMA official said.

According to him the original agreement and amendments were one sided, in favour of NOPEC with the amendments slanted in a manner to make the Sri Lankan government the guilty party and allows NOPEC to receive a substantial sum of money as compensation.

Furthermore, the official expressed concern over the fact that the Attorney General was never consulted at the time the agreements were signed.

“We are very concerned and suspicious of the fact that the Petroleum Resources Ministry Secretary has failed to get the Attorney General’s opinion on the matter and did not adhere to the Cabinet directive,” SEMA Chief Operating Officer Chris Dharmakirti told the Sunday Times.He said that instead of paying compensation to NOPEC, the government should sue it for damages. Mr. Dharmakirti said he believed the government could exit the contract without paying compensation and in the event any payment was requested it should be limited to the direct costs incurred by NOPEC for its research.

Petroleum resources secretary A.P.A. Gunasekera told The Sunday Times that the Ministry had requested Cabinet approval for amendments to the original agreement and said it was suggested that the AG be consulted when drafting the amendments.

“The Cabinet decided not to proceed with the amendments and to exit the contract through the payment of compensation. I have discussed this matter with the Minister and consulted the national procurement authority and a decision will be reached after discussions with TGS- NOPEC,” Mr. Gunasekera said.

He emphasized that the US$ 10 million mentioned was only an estimated amount.

Two weeks ago President Mahinda Rajapaksa had summoned a meeting to discuss the various points of view on the deal and the President later requested SEMA to further analyze the project and the issues involved.