Cairn and Texana among the four companies who have received exploration permits replied to the Ministry of Industry (MoI) after it warned that their permits would

be terminated if they didn’t furnish a convincing explanation regarding the slow progress of their operations.

The government had dispatched letters to four companies-Texana, Cairn, BBB Champion Company and Emirates Associated Business Group (EABG)-asking them to clarify the status of their Nepal operations. They were given 30 working days to respond. However, only two of them have called back.

In response to the government’s request, Cairn has sent two of its senior legal officers. Formal talks were held between the officials of the Department of Mines and Geology and the Petroleum Exploration Advisory Board and the representatives of Cairn last week, according to government officials.

During the talks, Cairn sought a legal exit from Nepal. However, government officials have sought fulfilment of the liabilities before it makes a legal exit.  

Rajendra Prasad Khanal, project chief at the Petroleum Exploration Promotion Project, said that Cairn would have to pay millions of dollars to fulfil its liabilities.

“As we want Cairn to fulfil its liabilities first, they have requested to end the contract first and then settle the liabilities process,” said Khanal. “They want to fulfil the liabilities on an instalment basis.”

As per the agreement between the government and the four companies, none of the companies is allowed to abandon the project

midway. These companies have to settle their outstanding payments for working here including the service rental.

Texana has replied to the government through a written document, which states that they are working here despite Nepal going through political uncertainty. The letter, however, seems to show that they are still conducting exploration work, said a senior government official.

“Texana’s letter indicates that they have responded to the government but without any details,” said the official. “Cairn, however, seems to be more serious as it fears being blacklisted.”   

In June 2012, Texana and Cairn Energy withdrew from their allocated blocks in the Tarai region

citing bureaucratic hurdles

and lack of cooperation from the government.

The government has divided the Tarai and Siwalik hills into 10 exploration blocks of 5,000 sq km each as being potential oil fields.

Texana had won the bids for Blocks 3 and 5 (in Banke and Chitwan) and entered into an agreement with the government in December 1998.

Six years later, the country’s petroleum exploration bids was further bolstered when Cairn received a license to explore

five more blocks-Blocks 1, 2, 4, 6

and 7 (Dhangadhi, Karnali, Lumbini, Birgunj and Malangawa respectively).

In July 2012, two more companies entered Nepal. The government awarded three petroleum exploration blocks to US-based BBB Champion and Dubai-based EABG. BBB got Block 10 (Biratnagar), while EABG was given Blocks 8 and 9 (Janakpur and Rajbiraj).

However, there hasn’t been much progress in the exploration process so far. Most of the companies have been neglecting the exploration process and have been sitting idle by applying force majeure, government officials said.

Two other companies BBB Champion and EABG have still not responded. The government, through the Ministry of Foreign Affairs and the US Embassy to Nepal, had dispatched a letter to BBB Champion to find out its position as it has not come into the Nepal government’s contact for a long time.

“The company has gone missing since a long time. Hence, we have asked the US Embassy to help us locate the company,” said Khanal. EABG has already asked the

government to terminate its licence. However, it too has been neglecting the government’s call to fulfil its liabilities before making a legal exit.