ONGC begins drilling third well offshore India as negotiations continue with Rocksource

Block operator, the Oil and Natural Gas Company of India Ltd (ONGC), has informed Rocksource ASA (Rocksource) that drilling of a third well on the block CY-DWN-2001/1 will commence within the next week. As with the first two wells, this third well will not test the prospect associated with the primary positive electromagnetic (CSEM) anomaly, as interpreted by Rocksource. Block CY-DWN-2001/1 is located offshore southeast India in the Cauvery Basin.

In its last update on its India operations (stock exchange announcement from 19th April 2010), Rocksource announced that ONGC and Rocksource were in negotiations related to the Farm-out Agreement (FOA) between the two companies and that, amongst other issues, these negotiations include the extent of Rocksource’s liability for costs relating to the first two exploration wells on the Block. These negotiations continue, and both Rocksource and ONGC wish to find a mutually agreeable way forward in order to utilize Rocksource’s integrated EM/Seismic technology in ONGC’s operations on the Indian Continental Shelf.

The process for assignment of a 10% Participating Interest under the FOA is not completed and Rocksource has not signed the Production Sharing Contract (PSC). It is Rocksource’s considered position that, unless there is a successful outcome from the ongoing negotiations, Rocksource will not be liable for any costs on the block.

Rocksource will continue to update the market as negotiations progress.