Bengaluru-based GEM Laboratories has been told by the Directorate General of Hydrocarbons that its demand for allocation of a new hydrocarbon field, instead of Neduvasal in Tamil Nadu awarded under the first round of the Discovered Small Field (DSF) Policy, cannot be fulfilled. It will have to apply afresh in the DSF round II if the company, part of GM group, plans to enter the area of exploration and production.
According to a person in the know, GEM Laboratories cannot be awarded a field arbitrarily as the law of the land does not allow it. The Neduvasal field has been facing heat from the locals and they have been demanding to declare the area as ‘protected agricultural zone’. Even state-run ONGC, which had earlier got a mining lease, could not start work as protests took political colour. There are cases filled in the National Green Tribunal against allowing hydrocarbon extraction activities in the area.
The Union Cabinet had in September 2015 approved 69 marginal fields to be offered under the DSF round I. Of these, 67 DSFs were clubbed into 46 contract areas and put on offer through online international competitive bidding. In March 2017, 31 contracts were signed with 22 companies. GEM Laboratories was one of the 15 new entrants who were awarded hydrocarbon fields relinquished by ONGC and Oil India under DSF round I.
The parent GM group has business interests in mining, agro industries, finance, power generation and retail, among others. Petroleum minister Dharmendra Pradhan earlier this week in Dubai unveiled the DSF round II, wherein 26 contract areas made up of 60 discovered oil and gas fields with 195 million tonne of hydrocarbon reserves will be offered. While bidding for these contract areas will start in July, contracts will be awarded by this November.
According to experts, while the GEM Laboratories episode will not deter new entrants from participating future rounds, they should do their own due diligence before bidding. “Though some of the oil and gas projects have been facing local issues, but that is true for other industries as well. Many projects get stuck due to land acquisition issues. Companies should be watchful,” said Anish De, partner, infrastructure and government practice, KPMG, in India.
Pradhan while awarding the contract had said local residents of Neduvasal will be taken into confidence before starting work and that there is no threat to agricultural activities due to hydrocarbon activities. However, locals remain defiant.