Oil and Natural Gas Corporation (ONGC) might soon approach the government to reduce the minimum work programme (MWP) for its KG-OSN-2009/4 block in the Krishna-Godavari Basin that was partially cleared by the Cabinet Committee

on Investment (CCI) in March this year.

Given that the block is in the KG Basin where RIL?s gas-rich D-6 field also lies, ONGC was hopeful of making large discoveries.

If ONGC does go ahead and make the request for a pro rata reduction in MWP, it will be not be the first company to do so. Recently Cairn India, which similarly received a partial CCI clearance for its KG-OSN-2009/3 block, requested the oil ministry for a reduced MWP. RIL-BP, in whose block also just 30-35% of the area was able to be explored after the CCI clearance, has already offered to give it up

In a letter to the oil ministry Cairn India wrote that 35% of the block is the so-called ?no-go? area. Of the remaining block area, 20% is “clear area” and the remaining is “high-risk area”, where exploration activity has been permitted with certain conditions. ?We are keen to resume exploration work in the high-risk area of the block considering its significant potential which will benefit the nation at large and all the stakeholders… Since the effective block area is now reduced as explained above, it is requested that the Minimum Work Programme be reduced in proportion to the reduction in the operationally feasible Contract Area in view of stipulation from Government of India notification,? Cairn wrote.

On the other hand, the RIL-BP combine has decided to relinquish its partially cleared block, which is also incidentally situated in the KG Basin.

The KG-DWN-2005/2 block, covering an area of 1,949 sq km, was awarded to BP along with Reliance Industries in the seventh round of auction under New Exploration Licensing Policy (NELP) in 2008.

BP wrote to the oil ministry that around 70% of the block falls in an area where DRDO and navy exercises are conducted and it is not commercially feasible to produce from the rest of the block.

An ONGC official told FE that with only 30-35% of the contracted area cleared for exploration the company will soon take a call on whether to surrender or propose a revised MWP for the block. ?We are studying the feasibility of producing from the restricted areas. We will respond with a revised MWP if it is commercially feasible,? the official said.

MWP commitments are submitted by the contractors while bidding for oil and gas blocks. It stipulates the minimum amount of work that the contractor is prepared to undertake during the exploratory phase including surveys, exploratory drilling, etc.

The MWP commitment for the ONGC block was designed to explore the hydrocarbon potential of the entire block area. Sources say that under the changed circumstances where only 30-35% of the block has been cleared for exploration, ONGC can request for a proportionate reduction to its MWP commitments. The remaining 65-70% of the block falls within sensitive defence zones including the impact zone of the IAF?s Suryalanka Guided Weapon Firing Range and Machilipatnam launch site.

A Directorate General of Hydrocarbons official confirmed that ONGC can approach the government for a proportional reduction in the MWP. The official added that the oil ministry has made it clear to companies that the decision over what to do with the partially cleared blocks ultimately lies with the contractors. “In the past such blocks would have to be surrendered. However, now the government has put the ball in the contractors? court over whether they would like to surrender the block or continue work on them with a pro rata reduced MWP,? he said.

The KG-OSN-2009/4 block was awarded to a consortium of ONGC (50% and operator), Oil India (30%), NTPC and AP Gas Infrastructure Corporation under NELP-VIII bidding. This exploration block is a shallow water block covering an area of around 835 sq km. The consortium which signed the production sharing contract (PSC) in June 2010 has so far invested about $0.44 million in the block.