The Hindu Business Line : SEBI urges Ministry to tighten disclosure norms for oil finds

The capital market regulator, Securities and Exchange Board of India (SEBI) has asked the Petroleum Ministry to develop a mechanism to keep a check on these market sensitive announcements.

Senior Ministry officials told Business Line that the Government is in the process of streamlining the existing norms for market sensitive announcements made by the companies.

The recent past has seen a number of companies claiming to have struck substantial quantities of gas or oil. This is even while they are required to get a certification from the Directorate General of Hydrocarbons (DGH).

With the market regulator keeping a close watch on the listed companies and the DGH expected to meet senior SEBI officials to work out a methodology to keep a check on discoveries and hydrocarbon reserves announcements by companies, efforts are on to develop a mechanism as soon as possible, an official said.

This may also require examining the past announcements of some of these companies, which had led to upward movement in their stock prices, the official said.

Incidentally, the DGH had raised the issue with the market regulator in the past and again after the current announcement by Oil and Natural Gas Corporation. In fact, the SEBI Chairman, Mr M. Damodaran, had recently said he would like the competent authorities to set out the disclosure standards with regard to such discoveries.

Recently, ONGC said it had discovered gas in the Krishna Godavari offshore area (KG 98/2). Earlier this year, ONGC reported three oil and gas finds — in shallow-waters on the West Coast and in the deep-waters in KG basin on the East Coast.

In 2002, Reliance Industries Ltd announced that it had found as much as 14 trillion cubic feet (TCF) of gas in the KG basin. Gujarat State Petroleum Corporation, in July, announced that it had discovered natural gas in the area, tipped as the largest gas find. The area is said to have reserves of as much as 20 TCF.

On whether there is any mechanism to check the announcements, sources said, under the Production Sharing Contracts (PSCs), which are signed between the Government and companies, there are very clear clauses regarding announcements of discovery.

In the case of the reported gas discovery in KG offshore by ONGC, the condition under Article 10.1(a) of PSC had not been fulfilled before making it public, sources said. Moreover, at the time of reporting the discovery, the well was an open hole and was being logged for knowing the indications for hydrocarbons. This in no way gives any idea about the quantum of hydrocarbon in-place reserves present in the discovery and if, reported, will purely be speculative in nature and mislead the common investor, industry experts said.

As per the terms of PSC, if and when a discovery is made within a contract area, the contractor shall inform the Management Committee and the Government of the discovery.

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