ONGC-RIL row: Expert agency to meet both parties next week

Independent expert to hold final meeting with two firms before submitting report on October 8

The long-standing gas dispute between state-run Oil and Natural Gas Corporation (ONGC) and Reliance Industries Ltd (RIL) could be approaching a resolution. The independent expert agency appointed to look into the technical issues is set to hold a final meeting with the affected parties on Thursday.

ONGC had claimed, in a petition filed in the high court here in May 2014, that RIL, while exploiting its own reserves in the KG-D6 (or KG-DWN-98/3) block, might have drained out natural gas from ONGC’s adjoining KG-D5 (or KG-DWN-98/2) block and the Godavari PML, in the Krishna-Godavari basin off the Andhra coast.

With RIL contesting the claim, and the HC having disposed the petition last month by asking to wait for the government to take action on the basis of the expert report, all eyes are on the findings to be given by US-based DeGolyer and MacNaughton (D&M) on continuity of reservoirs.  “The international expert will hold a final meeting with the stakeholders before October 8,” said an industry source. E-mails to RIL and ONGC, seeking comments, elicited no response.

The KG-D5 block was awarded under the first round of New Exploration Licensing Policy bidding in 2000, to Cairn Energy India (CEIL). In 2003, ONGC asked the government for 90 per cent participatory interest (PI) and operatorship of the block from CEIL. The government’s approval, making ONGC operator of the block, was in March 2005. CEIL also assigned its 10 per cent interest to ONGC in 2011, making the state-run firm a 100 per cent PI holder and operator.

The controversy began when ONGC, to confirm channel continuity, wrote a letter to the Director General of Hydrocarbons (DGH) in 2013, for data on the adjoining RIL block.

DGH asked RIL to provide the assistance. It also sought from ONGC necessary data on the G-4 and 98/2 blocks. ONGC and RIL met in September 2013. ONGC says it was agreed that data would be exchanged after signing a confidentiality agreement.

In the first technical meeting with RIL in December 2013, ONGC informed it that on initial seismic data interpretation, it was evident that a well drilled by the two companies were connected through continuity of common reservoir. So, RIL’s wells might be draining its gas.

In February 2014, the DGH stated the issue should be resolved through an independent study by engaging a third party. The two sides later agreed for the study, which would evaluate the possible continuity of channel and reservoirs across the block boundaries.

In May 2014, the parties met again and agreed for appointment of a consultant and data sharing but could not agree for estimation of volumes for gas balancing. ONGC, therefore, approached the court in May 2014.

Two months later, the petroleum ministry told the high court that ONGC was making “frivolous allegations” against the government. The state-run firm then alleged its gas might be flowing out of RIL’s wells. The ministry said ONGC never raised any issue on connectivity of reservoirs or channels ever since it was granted mining lease of the Godavari PML Block (G-4) in 2008 and even when RIL started production from KG-D6 in April 2009.

The government also said it had, along with the DGH, taken all efforts to resolve the matter amicably and various meetings were conducted, leading to RIL agreeing to appoint an independent agency to ascertain connectivity of reservoirs. The ministry argued the petition of ONGC had become infructuous after appointment of the independent agency, D&M. A year later, in September 2015, the HC disposed off ONGC’s petition, asking it to wait for six months for the government to take action on the basis of the expert report.