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ONGC alleges gas loss due to RIL

LiveMint logoLiveMint 15-05-2014 Shreeja Sen

New Delhi: The Delhi high court on Thursday issued notices to the oil ministry and Directorate General of Hydrocarbons (DGH), asking them to respond to allegations by Oil and Natural Gas Corp. Ltd (ONGC) that Reliance Industries Ltd (RIL) drew around 18 million cubic metres of natural gas from fields owned by the state-run oil explorer.

Justice Manmohan asked the ministry to file its response by 29 May, when the matter will be next heard.

ONGC has alleged in a petition that RIL exploited gas reserves belonging to ONGC in the course of its own drilling activities. The adjacent deepwater fields in question are RIL’s D6 field (KG-DWN-98/3) off the east coast and ONGC’s KG-DWN-98/2 block.

ONGC has asked the court to direct the oil ministry and the DGH​ to appoint an independent agency to determine the amount of gas that has been drawn by RIL and accordingly evaluate the compensation to be awarded to ONGC.

In an emailed statement, RIL said any claims of impropriety on the part of RIL are baseless and the company will take steps to safeguard its position and rights.

“RIL has been constructively engaged with ONGC in sharing of data and finding a suitable resolution through appointment of an independent third party expert—the most recent being as late as on 9 May 2014. ONGC and RIL have jointly signed minutes of a meeting to record such an understanding. Any inference prior to such assessment is mere speculation and commencement of legal proceedings at this juncture is unwarranted,” the statement added.

A senior DGH executive, requesting anonymity, said, “A third party expert was to be appointed for determining the cross flow and cross balancing shortly. I don’t know what was the trigger for approaching the court.”

There are internationally accepted formulae, called unitization, to calculate such losses.

According to the petition, ONGC blocks, which haven’t been exploited and developed yet, contain approximately 50 billion cubic metres of natural gas. If the DGH had been vigilant about the RIL drillings, it alleged, there would have been no loss to ONGC.

The oil and gas explorers had signed an agreement for data-sharing to resolve the vexed issue of whether the Mukesh Ambani-controlled company drew gas from a reservoir that overlaps the two fields. ONGC, India’s largest oil and gas explorer, wants to be compensated if it is established that RIL indeed drew gas from this reservoir.

The ONGC-RIL issue comes at a time of declining production at RIL’s KG-D6 block. RIL with its partners UK oil and gas giant BP Plc. and Canadian explorer Niko Resources Ltd (Niko) have also slapped an arbitration notice on the government of India, seeking a hike in natural gas prices which was notified by the government on 10 January 2014.

ONGC has been unable to produce from the deepwater field off the coast of Andhra Pradesh and is scouting for a partner after Norway’s Statoil ASA and Brazil’s Petroleo Brasileiro SA (Petrobras) quit the consortium. ONGC has been battling concern over its production capabilities and diminishing yields at its ageing oil fields. Most of the company’s domestic fields are more than 30 years old.

“The Krishna Godavari Basin is an established hydrocarbon province with a resource base of 1,130 mmt (million metric tonnes), of which 555 mmt are assessed for the offshore region,” DGH’s website says.

Utpal Bhaskar contributed to this story.

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