(This story originally appeared in

on Nov 28, 2013)

NEW DELHI: The Egyptian government is tightening the screws on projects worth $1.5 billion by two private companies – Sanmar and Aditya Birla group – in that country to pressure a consortium of Indian state-run oil companies to sign agreements for two exploration blocks they had won in 2008 but want to exit.

Sanmar has a PVC/caustic soda plant in Port Said and the Aditya Birla group has carbon black and polyfibre facilities in Alexandria. Both are under the purview of the Egyptian petroleum ministry and have been increasingly facing administrative, regulatory and gas supply issues.

Sources said efforts by India’s ambassador Navdeep Suri to intercede with the authorities for resolving the issues have been frustrated by the Indian oil consortium’s dealings with Egypt’s national oil company, Ganope (Ganoub El-Wadi Petruleum Holding Company) regarding exploration Block 3 in South Quseir and Block 4 in South Sinai.

The consortium in question is led by Gujarat State Petroleum Corporation. Hindustan Petroleum Corporation and Oil India Ltd are partners. The consortium won the blocks in the first round of auctions conducted by Ganope in 2008. The consortium discussed the nitty-gritty of concession agreements for four years, during which it also made “specific commitments” in the contracts -in December 2009 and January 2012.

It turns out that consortium had developed cold feet in the course of those discussions but neither informed Ganope about it nor took Egyptian company’s communications seriously.

In the meantime, the consortium’s bank guarantee has lapsed.

This has upset Ganope as winning bidders have to forego their bank guarantee by way of damages if they decide to pull out after the auction results. Ganope has asked the consortium to reinstate the bank guarantee for the blocks and threatened legal action which can turn into a major glitch in bilateral relations.

Suri has told Delhi that the idea is not to pressure PSUs to take up commercially unviable projects but they should think through more carefully before bidding. “They (PSUs) have no business to behave in a manner that adversely affects the interests of other Indian companies and complicates bilateral relationship with an important part of the Egyptian government.”