In less than a year of signing a memorandum of understanding with Mukesh Ambani-promoted Reliance Industries Ltd (RIL) to explore the possibility of sharing the latter’s infrastructure on the East Coast, Oil and Natural Gas Corp (ONGC) has taken RIL to the Delhi High Court. The state-run company has accused RIL of pilfering gas from its blocks sitting next to the Ambani firm’s KG-D6 gas block.
ONGC’s tough stand comes a day before Friday’s election result, which will decide who forms the next central government. This also comes within days of RIL serving an arbitration notice on the government for a higher gas price. ONGC fears gas pool in its G4 (GodavariPML) and KG-DWN-98/2 blocks extends into KG-D6 and, since it will take time to begin production from the block, RIL’s wells might be pumping out its share of gas.
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An ONGC spokesperson refused to provide further details, saying the matter was sub judice.
RIL said in a statement all its petroleum operations were in accordance with the production-sharing contract and the approved development plan. “All well locations and well profiles have been specifically reviewed and approved by the management committee,” it said.
ONGC had earlier said four wells drilled by RIL in the KG-D6 block were within “a few hundred metres” of its gas fields, so it feared the two might be sharing the same pool of reservoir.
In July last year, ONGC had signed an MoU with RIL to use the latter’s infrastructure. This was done to save a significant $4-5 billion in capital expenditure and expedite field development, so that its deep-water fields could be monetised early. Nine of ONGC’s gas discoveries in the Krishna-Godavari block (called KG-DWN-98/2), sit next to RIL’s KG-D6 block.
Former ONGC chairman Sudhir Vasudeva, during whose tenure the companies signed the MoU, said upstream companies the world over followed the well-established method of unitisation for sharing reserves in case of overlap.
The method involved sharing of costs and reserves, as well as excess production. “The problem in this case arose because there wasn’t sufficient information available from RIL,” he said.
R S Sharma, another former ONGC chairman, said it was unfortunate that the company had to take legal recourse in the matter because petroleum companies globally worked in close association.
ONGC, which had planned a capital expenditure of over Rs 51,000 crore ($9 billion) on the block by 2030, also planned to share RIL’s gas processing and transportation facilities in the KG basin.
RIL’s own production from its D1 and D3 fields in the KG basin is flagging. Its pipeline and other offshore and onshore facilities capable of handling gas output of 80 million standard cubic metres per day (mscmd) could be used. RIL and ONGC have, in the past, worked out a similar arrangement in the Panna-Mukta-Tapti block, where RIL, ONGC and BG Group are partners.
This March, ONGC said it had written to the petroleum & natural gas ministry requesting for data-sharing with ONGC to study and evaluate the possibility of a reservoir continuity in the prospective area. Under the production-sharing contract, the upstream regulator, Directorate General of Hydrocarbon (DGH), has a role to play in such situations. But ONGC was asked to resolve the issue independently with RIL. ONGC had also suggested intervention of third-party experts. Director (Exploration) N K Verma had in March said: “Some data on overlapping gas pools have been exchanged, but things need to progress from there.”
The recent communication from ONGC to the ministry was to apprise the administrative ministry of the status. Vasudeva said, in the case of blocks given under the New Exploration and Licensing Policy (Nelp), DGH should act as an arbitrator. “Since the ONGC block is under a different policy regime, which precedes Nelp, there is a need for an upstream regulator to look at such issues.”