Oilmin may change policy to avoid standoffs over drill stem tests

Written by fe Bureau | New Delhi | Updated: Aug 5 2014, 06:07am hrs
With the Directorate General of Hydrocarbons (DGH) contending that ONGC and RIL have not undertaken the drill stem tests (DST) at their respective hydrocarbon finds in the KG basin, the oil ministry is contemplating a policy change to ensure that such stand-offs are not common in the future.

The ministry would soon convene a meeting of DGH and the explorers to review the contractual and technical necessity of carrying out the DST test. After deliberations, the ministry would seek Cabinet approval to put in place a long-term solution, a senior petroleum ministry told FE. The DGH is also looking at global practices in deep water acreages such as the Gulf of Mexico to examine whether DST is a must for approving a discovery.

In RILs case, citing the production sharing contract, the previous director general RN Choubey had said that the flow of hydrocarbon to surface was mandatory to recognise a discovery. In which case, the DST is must. While this has caused problems for the explorers, the government reckons that it cannot reverse that decision without a Cabinet approval.

Recently, the DGH turned down three out of 14 discoveries submitted by ONGC in its KG basin blocks KG-DWN-98/2 and G4 because the PSU explorer did not conduct the DST.

According to ONGC, the guidelines issued by DGH in 2007 does not make it mandatory to conduct DST for smaller discoveries. Out of the three discoveries not recognised by the regulator, one is at a depth of 3,000 metres, while other two are smaller finds.

In order to conduct DST, a deep water rig needs to be hired for atleast 20-25 days. Each day, the rent for a deep water rig is almost $1 million. Moreover, we have already done the mini drill test. We have made our representations to DGH, said a senior ONGC official familiar with the issue.

ONGC has submitted declaration of commerciality for nearly 2-3 TCF of gas and 100 mmt of crude oil. Non-recognisition of three discoveries may mean ONGC not able to monetise about 1.5 TCF of gas.

Earlier, Mukesh Ambani promoted RIL too faced the same problem when three gas discoveries (D29, D30 and D31) in its KG-D6 block were not given go-ahead by DGH for not doing DST.

Later, the petroleum ministry has said it is agreeable to giving the firm a one-year extension to redo the necessary tests at three gas discoveries (D29, D30 and D31) in its KG-D6 block. But, RIL will be allowed to recover only 50% of the cost it incurs to conduct the DST. The matter was pending sans Cabinet approval.

Now, since ONGC also faced the same issue, petroleum ministry wants to have a policy reform to settle the contentions.