The Tamil Nadu government, which is already saddled with a huge revenue deficit, may see a further dent in its income as it stands to lose thousands of crores of rupees if hydrocarbon exploration activity in the mining lease areas is blocked.

Hinting that the latest controversy over hydrocarbon exploitation in Neduvasal has more to do with politics, a senior official associated with the development said that, on an average, ONGC has been annually paying ₹250-350 crore as royalty to the State and in the past five years, it has paid ₹1,816.43 crore as royalty and VAT/sales tax.

In the recently concluded Discovered Small Fields auctions, two contract areas — Karaikal in Puducherry, and Neduvasal in Tamil Nadu having an in-place volume of 4,30,000 tonnes of oil and oil equivalent gas (oil plus gas) — were awarded to private contractors. According to estimates, these two areas are expected to generate gross revenues of ₹300 crore as well as a royalty of ₹40 crore for the State governments. These areas belonged to ONGC but were taken back by the Ministry of Petroleum and Natural Gas for auction. Gem Laboratories Pvt Ltd emerged as the successful bidder for Neduvasal.

Dismissing allegations that the Tamil Nadu government was not informed or that permission was not taken before starting the exploration activity or putting the block under the hammer, another official said: “Mining lease approval is given by the State government. This is a discovered block — exploration has happened. So, the State was in the know.”

ONGC was given the area under the petroleum exploration licence in 1986. Exploration permission from the State government was given in 2008 and the mining lease was awarded in 2013 for seven years. In fact, ONGC had written to the district administration of Neduvasal on December 30, 2016, seeking to covert the mining lease from seven years to 20 years.

As for the issue of not seeking approval of the State before putting it up for auction, the official said: “Being a Central subject, we don’t need their approval. However, the State was informed in December 2015 when the DSF policy was put in place. Besides, now it will only be a transfer of the mining lease.”

Environment approvals and other regulatory nods are required only when a new contractor decides to drill more wells, said the official .

Job creation

An oil and gas player active in the Tamil Nadu region pointed out that “royalty and other levies are just one component. What about the employment it generates? The power plant in that area run by the State-owned company is fired by the gas being produced there.”

Asked why there was no dialogue with the locals, an official, on condition of anonymity, said: “The situation was so bad that it was difficult to converse. People were being gheraoed . There were other law and order issues.” Regarding concerns over the impact of such activities on agriculture and soil condition, contamination and depletion of groundwater and methane generation, among others, an official with the Petroleum Ministry said that operators get an Environment Impact Assessment done before carrying out drilling and other activities. The process of drilling and production requires very limited surface land area (generally 120X120 square metre) which will not affect agriculture or the soil of the entire lease area, he said, adding that operators are required to follow strict environmental norms for the use of operational land.

Regarding groundwater table, the official said that extraction is being carried out from deeper earth area (generally beyond 1,000 m), and thus aquifers, which are located at shallower levels, are not affected.

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