ONGC queers Cambay exit for Niko with claim of gas over-production

Written by Pranav Nambiar | New Delhi | Updated: Nov 8 2013, 11:22am hrs
OIL and Natural Gas Corporation (ONGC) has alleged that Niko Resources CB-ONN-2000/2 field in the Cambay Basin has drawn gas from the PSUs connected neighbouring field called Olpad, a move that could affect Nikos plans to leave the field with ease.

ONGC was expected to take over the Niko assets allowing an easy exit for the Canadian company, but with the PSU now seeking compensation for over-producing gas, the transfer will have to wait.

An ONGC official told FE that Niko has exceeded its share of production that was laid out in the gas balancing pact between the two firms. Gas pressure from the ONGC field is said to have come down as a result. The matter has been raised in the past as well but is crucial now as ONGC is expected to take over the assets of the field after Niko decided to relinquish the field claiming its economic life has ended.

ONGC officials said this is a normal occurrence globally in blocks where different firms have fields that share the same reservoir. A gas balancing agreement covers the manner in which volumes of deferred gas output will be balanced between the parties to the agreement. If it is breached by either party, the company over-producing is liable for compensating the aggrieved company.

Sources said the alleged over-production on Nikos side is to the extent of around 200 million cubic metre, but ONGC officials did not confirm this figure to be accurate.

ONGC has similarly raised the possibility of Reliance Industries (RIL) drawing gas from one of its fields in the KG basin, but this would require tests to verify. In the case of RIL, we just conveyed to the DGH that there is a possibility of a migration of gas. But this has not been conclusively proved, the ONGC official said.

An oil ministry official confirmed that it has received ONGCs communication that Niko has over-produced from its field. We will ask DGH to examine ONGCs claims by conducting tests on flow rate. Though ONGC has sought compensation, as of now, no final decision has been reached, the official said.

Nikos field which started commercial production from the Cambay field in 2004 was abandoned by the company on October 2012 stating it was not feasible to produce from the field anymore and the assets from the field were to be transferred to ONGC. ONGC is still willing to take over the surface and subsurface facilities and mining lease of the field but only after settlement over the issue of gas migration. The Niko field, which stretches across 5,298 acres across has 13 wells on stream. ONGCs Olpad field and and Nikos CB-ONN-2000/2 field are in continuity in the Upper Kand Formation of the Cambay Basin in Gujarat.