1. How Reliance Industries has made ONGC dispute worse for govt

How Reliance Industries has made ONGC dispute worse for govt

State-run firm cites 2003 D&M report to argue RIL’s FDP had included reserves outside its block’s boundary

By: | New Delhi | Updated: June 9, 2016 8:18 AM
Sources told FE that RIL, citing a submission before the AP Shah panel by the directorate general of Hydrocarbons (DGH) to the effect that the government is the owner of natural resources, including natural gas, argued that if gas had indeed migrated to KG-D6 from adjoining areas, it would rather sort out the issue with the government and not the PSU explorer. (Reuters)

Sources told FE that RIL, citing a submission before the AP Shah panel by the directorate general of Hydrocarbons (DGH) to the effect that the government is the owner of natural resources, including natural gas, argued that if gas had indeed migrated to KG-D6 from adjoining areas, it would rather sort out the issue with the government and not the PSU explorer. (Reuters)

Making it potentially more difficult for the government to resolve the high-profile dispute between ONGC and Reliance Industries (RIL) over the migration of natural gas from the state-run firm’s idling Krishna Godavari fields to the private company’s adjoining KG-D6 block, RIL has virtually disassociated itself from the proceedings of a designated panel.

Sources told FE that RIL, citing a submission before the AP Shah panel by the directorate general of Hydrocarbons (DGH) to the effect that the government is the owner of natural resources, including natural gas, argued that if gas had indeed migrated to KG-D6 from adjoining areas, it would rather sort out the issue with the government and not the PSU explorer. RIL “walked out” of the hearing by the panel on one of these days and did not turn up for subsequent hearings, including the final one, the source confirmed.

RIL did not respond to an email sent by FE on May 27. FE had asked the company if it was correct to understand that RIL is opposed to the AP Shah panel and would not be agreeing to its recommendations, as the company didn’t participate in all the hearings.

The one-member Shah panel was set up by the government on December 15, 2015, to recommend the action it needs to take on the issue, following a report by US-based consultant DeGolyer and MacNaughton (D&M) which stated that as much as 11.122 billion cubic metres of natural gas had migrated from ONGC’s 98/2 area to adjoining KG-D6 block of RIL.

Sources said RIL took the strong stand after ONGC placed before the Shah panel during one of the hearings an earlier, at least a decade-old report by D&M, which indicated that RIL’s field development plan for its KG-DWN-98/3 block (KG-D6) had taken into consideration reserves outside the block’s boundary.

ONGC, while making a strong case, cited a D&M document titled “Appraisal report as of March 31, 2003 on KG-DWN-98/3 (Canadian policy no 2-B Case)” told the panel that RIL and partner Niko Resources were aware of the possible migration of gas. It was Niko which appointed D&M to study the development plan for KG-D6 based on the data provided by RIL.

D&M, which relied on the data being provided to it and without carrying out a new survey, opined that — “the OGIP (original gas in place) and associated reserves that are located “off” (RIL-Niko’s) KG-DWN-98/3 block have been included as possible reserves attributable to development of KG-DWN-98/3.” The consultancy firm, according to sources, also indicated that the reserves “off” the KG-D6 block could belong a KG-OS-IG, a pre-NELP nomination area of ONGC.

RIL and Niko Resources had questioned the jurisdiction of the Shah panel and wanted the dispute to be resolved by arbitration. Both the companies had separately written to the petroleum ministry informing it of their stands. However, RIL later decided to participate. Another partner in the consortium — UK-based BP — has always participated in the Shah panel.

ONGC had moved the Delhi High Court alleging theft of its gas by RIL by way of drilling wells close to its block. The KG-D6 block started producing hydrocarbon in 2009. ONGC has not produced any oil or gas from its block. On September 10, the Delhi High Court disposed of ONGC’s petition and directed the government to take a decision within six months after it receives a report from an independent panel.

The Shah panel, set up in December last year, has been asked to look into legal, financial and contractual provisions and submit a report within three months. It also has the task of reporting any “acts of omission and commission” on part of all stakeholders including RIL, ONGC, the DGH, to the government. It needs to “quantify the unfair enrichment, if any, to the contractors of the adjacent block KG-DWN-98/3 (KG-D6) and measures to prevent future unfair enrichment to these contractors on account of gas migration” and “recommend action to be taken to make good the loss to ONGC/government on account of such unfair enrichment to the contractors”.

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    Abhishek Sikchi
    Jun 9, 2016 at 5:11 am
    Financial Express : Be useful and intelligent to differentiate between the logos of Reliance Industries and Reliance ADAG
    Reply

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