The much-awaited international independent consultant report on whether Reliance Industries Ltd has made merry on ONGC’s east coast gas or not could just be the ‘beginning of the end’ in a clash between the country’s two corporate giants.

The American consultant — DeGolyer and MacNaughton (D&M) — is expected to submit its report to the Ministry for Petroleum & Natural Gas in the next few days.

Reservoir continuity ONGC had alleged that RIL and its partners in the Krishna Godavari Basin D6 block sucked out gas from the public sector explorer’s adjacent block and took advantage of the reservoir continuity — an allegation strongly refuted by RIL.

But, if the consultant report does prove ‘reservoir continuity’, then — How will the two share costs and revenues? Will the contractors agree on joint development of the area as prescribed under the production sharing contract?

While both companies agree that technical assessment of reservoir continuity is a “First Step” to initiate discussion on development, implementation, operation and economic/commercial aspects between operators, joint development may not be easy.

There are global examples of such a situation — like the biggest connected gas field between Iran and Qatar (called South Pars in Iran and North Field in Qatar). In this case, each side has decided to individually develop fields.

“During recovery, while migration of hydrocarbons is natural, it is fairly difficult to assess the pattern of migration, whether from within the block or outside unless the parameters are monitored in production wells in the entire area,” a reservoir expert associated with east coast assets in the country said.

“There is no ‘one solution fits all’ in such cases. It is not easy to work on joint development at this point, when fields (D-1 and D-3) in question have already produced their maximum and today are on a decline,” says an official closely associated with RIL. Under the production sharing contract, any activity undertaken by a contractor can only be done after explicit approval of the block Management Committee – which sees the operations of the block and has representatives from the Ministry and Directorate General of Hydrocarbons with veto power. Every activity is reviewed technically, operationally, economically and contractually before it is approved by the committee, the official pointed out.

RIL has invested more than ₹40,000 crore in development of D1, D3 fields, which went into production in 2009. ONGC is yet to start production. Besides, claims cannot be made on a simplistic calculation of volume of gas multiplied by price without taking into consideration the capital investments made, operating expenditure incurred and royalty and taxes paid to the government, sources said.

It will be a challenge before the government. Once it gets the report it will have to take into consideration the arguments of both sides as the decision will set the path for any such cases in the future.

Related Topics
comment COMMENT NOW