Exxon Wants Global Arbitration Option, Compensation Assurance

Exxon Wants Global Arbitration Option, Compensation Assurance

Potential For Success ‘Keen to be a long-term partner,’ ExxonMobil tells the govt that the two key regulatory changes can facilitate a faster entry of foreign cos into Indian oil & gas exploration

Global energy giant ExxonMobil has told the government that two key regulatory changes can facilitate its swifter entry into Indian exploration sector: option to pursue international arbitration in case of a dispute with the government, and an assurance that the company will be justly compensated if the state takes over its business or assets, according to officials.

ExxonMobil appears to be warming up to India lately. It recently signed a preliminary agreement with ONGC to undertake joint technical studies, cooperate in difficult fields and jointly bid for exploration acreages. It accessed the government’s National Data Repository to study large amount of geological data to evaluate the possibility of an exploration bet, according to officials.

ExxonMobil didn’t comment on its regulatory demands but said it was “keen to be a long-term partner in India’s energy journey”.

“India has already taken a host of encouraging steps forward by facilitating access to seismic data, which is critical to enhancing the potential of success,” ExxonMobil said in an emailed response to ET’s query. “At the same time, developing the right contractual terms that secure stability and provide investor protection will go a long way in ensuring that projects are viable and help India compete for and win global capital.”

The company has been engaged with the government on several regulatory aspects, seeking clarifications on some, and urging key changes on others, such as the freedom to the explorer to invoke international arbitration in case of a dispute with the government, according to officials.

Current oilfield contracts provide for arbitration in India, which is not confidence-inspiring for some foreign companies, which think international arbitration mechanism is likely to be fairer to them. The government, however, appears to believe that international arbitration somewhat tilts the scale in favour of foreign companies.

The second key demand is to justly compensate the business owner in case the government decides to expropriate or take over business or assets. ExxonMobil has discussed both with the government, which is yet to take a final view on this, according to officials.

“Expropriation should not worry foreign companies. What are its probabilities  negligible,” said an official. But industry executives cite cases of nationalisation of two foreign-owned oil companies-now known as Hindustan Petroleum and Bharat Petroleum in the 1970s to argue that such expropriation can’t be ruled out.

In the last few years, India has introduced a raft of policy measures, bundled as Hydrocarbon Exploration and Licensing Policy (HELP), but has barely caught the attention of foreign oil giants.

Of the 193 bids received for 99 blocks auctioned under the new policy, just one came from a foreign company, BP, which bid in joint venture with Reliance.

“The recent upgrades to the HELP regime have opened the door to a growing understanding of India’s resource potential and the technical and geological risks. Currently, we are taking some key early steps to help form a sharper vision of the region’s prospectivity,” ExxonMobil said.


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