July 11, 2002	Thursday	Rabi-us-Sani 29, 1423

ISLAMABAD, July 10: The government has warned a US-based petroleum company that it would be liable to heavy liquidity damages unless it completed the drilling of 19 exploration wells in Sindh province before end of this year.

Informed sources told Dawn that petroleum ministry has written to the Orient Petroleum Inc (OPI) that it was already in default for not meeting last year’s work target under the petroleum concession agreement (PCA).

These sources said that under the agreement OPI was required to complete drilling of 19 wells before December 2002. These included 12 exploratory wells in Mirpur Khas block and seven wells in Khipro block, both in the Sindh province.

Of these, the company was obligated to drill four exploratory wells last years i.e. before December 2001 and 15 before December 2002. Last year, the company could drill only two wells and could not meet the commitment of four wells and got extension for another which is permissible under the rules.

This year again, the company has failed to drill even a single well despite the fact that first half of the year is over. Within next five months, OPI would have to drill 15 wells which is next to impossible.

A government official said that because of failure of OPI to meet its commitments, the government could not achieve the target of drilling exploration wells.

All other exploration and development companies achieved their 100 per cent target of exploration wells and OPI was the only company that did not meet its target.

Asked as to why the government did not claim liquidity damages from the company under the rules, the official said that the government has reminded the company of its failure to meet the deadlines and would serve a default notice by third quarter of this year.

The official said that OPI had demanded to be given waiver from providing a $19 million bank guarantee for another exploration block in Sakhi Sarwar area. The government not only turned down the request but was now investigating whether the guarantee provided by the company was bankable.

The sources said that the PCA between the government and the exploration company is required to be signed within six months of the bidding results but this target too could not be achieved in time.

Shahid Sattar, the president of OPI when contacted denied that his company was in default or had received any notice from the government. He said that it was incorrect that OPI has not achieved its performance target and it was misrepresentation of facts.

He said that the government had granted December 28, 2002 to drill 19 wells out of which two wells have been drilled. For the remaining, an exploration rig has been imported from China while one has been mobilized locally. He said that the government could not issue any notice before December 28 this year under the agreement.

OPI’s two exploration wells in Mirpur Khas went dry last year and the company had to fire around 100 employees to offset its losses.