D6 row: Should the regulator turn mediator?

The case is getting stronger for the Directorate General of Hydrocarbons (DGH), India’s upstream regulator, to play an assertive role in settling disputes between oil and gas exploration companies over the sharing of reserves.

State-owned ONGC, which recently claimed that gas from its yet-to-be-developed KG-98/2 block is flowing down to Reliance Industries Ltd’s (RIL) D6 field in the Krishna-Godavari basin, off India’s eastern coast, is convinced the DGH should play mediator in mitigating any dispute. RIL’s D6 field is already producing gas.

Historically, the DGH has taken a consultative approach, leaving it largely to the warring camps to resolve issues. While the approach has had its share of successes, there are cases where disputes have remained unresolved even after a decade.

Asked if the company expects an easy solution to its issues with RIL in the existing regulatory framework, ONGC Director — Exploration N.K. Verma said: “It is obligatory for DGH to provide mediation if there is a dispute.”

Verma, however, hastened to add that there is “no dispute” with RIL at this juncture as the two companies reached a data-sharing arrangement earlier this month to explore the validity of the claim.

RIL officials were not available for comment.

Incidentally, ONGC flagged the 98/2 issue nearly a year ago based on 3D seismic studies on its side.

For a true assessment of the situation, it was necessary for both companies to collate their data before approaching a third-party consultant for valuation purposes.

However, sources say, this could not happen until earlier this month due to RIL’s reluctance to share data on D6. Sources say RIL, was keen to enter a similar arrangement with ONGC for another deep-water block that borders the western side of KG-98/2.

ONGC was keen to oblige RIL as quid pro quo . It is not known if the recent developments involving D6 have paved the way for greater cooperation between the exploration giants.

Meanwhile, Verma confirmed that ONGC would not back off from its claim on alleged migration of hydrocarbon from its Olpad field to the Niko Resources-operated Bheema.

Niko was quicker to develop and exploit resources at Bheema. ONGC is now complaining of reduced production potential at Olpad.

No third-party assessment could be done due to the lack of an agreement on the sharing of costs.

ONGC has declined a proposal from the regulator to take over Bheema and extract the leftover resources, if any, to compensate for the alleged loss. The company insists on having a retrospective sharing of resources.

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