The Hindu Business Line : E&P cos need clearance before appointing evaluator

DGH mandates
Approval of management committee before appointing independent evaluator to avoid both duplicity and difference of opinion.
Norms to be prescribed under product sharing contract

New Delhi , Sept. 25

Making announcements about new oil and gas finds may no longer be simple for exploration and production (E&P) companies such as Reliance Industries Ltd, ONGC, GSPC and Cairn Energy. The Directorate General of Hydrocarbons (DGH) has now mandated that before appointing an independent evaluator for assessing the potential of oil and gas discoveries, the companies would need the approval of the management committee constituted to monitor the operations of that block. The management committee has representatives of the DGH and the consortium or the single contractor (if the operator is single).

Companies in the E&P field have in recent past made declaration or disclosures of discovery made by them based on the assessment of an independent evaluator, which was different from the assessment made by the DGH. Speaking to Business Line, Director General of Hydrocarbons (DGH), Mr V.K Sibal said, "This would avoid any duplicity of work as well as any differences emerging in reserve assessment."

Elaborating, officials in the Petroleum Ministry said, "Most of the E&P companies come in consortia. Hence, this move would avoid consortium members getting their own evaluation of reserves done. Also, it would not send any wrong signals to the investors or create any confusion in the investors mind."

After much deliberation on how to monitor such announcements, it was decided that the norms could be prescribed under the product-sharing contract (PSC), officials said. The DGH has been working on the norms that would put in place a system to alert investors and stock exchanges of any premature declaration or disclosure of an oil and gas discovery made by such companies. Moreover, the discoveries could not be linked to reserves till a competent authority, in this case the DGH, certifies it.

As regards guidelines to protect investors from being misled on speculative information pertaining to discoveries by companies planning to tap the capital market or those already listed, officials said that DGH would inform SEBI if any E&P company is found deviating from the obligations of the production sharing contract signed with the Government. The capital market regulator would then take a call, he said, adding that the DGH has been advised by SEBI to do so.

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