New Delhi, Jan. 11
EXPLORATION and production (E&P) companies may have to exercise caution before making any announcements about new oil and gas finds by them. The Directorate-General of Hydrocarbons (DGH) is in the process of finalising 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.
Once the norms are in place, the Securities and Exchange Board of India and the DGH propose to have coordinating officers in their respective organisations, who would monitor the implementation of these guidelines.
To check share price `rig':Official sources said the DGH had recently made a presentation to the capital market regulator SEBI on the issue. At the meeting it was agreed that the DGH would be the final authority on such announcements and would put in place a mechanism that would check the validity of any oil and gas strike. This would ensure that announcements of new findings were not misused by companies to rig their share prices, sources told
New classifications:Asked about the proposals, sources indicated that the discoveries could not be linked to reserves till a competent authority, in this casethe DGH, certifies it. The norms are likely to classify announcement of reserves into various categories. Petroleum discoveries are very difficult to estimate as even a promising reserve could turn out to be unrecoverable or too expensive to recover. Accordingly, the finds would be classified as proven, probable and possible, which have significantly different implications for the explorer and the country.
The new guidelines are to direct companies to make declarations of significant discovery only after detailed technical appraisal of the discovery with prior Government nod.
Further, the norms are likely to suggest that the companies could announce the new discoveries with a statement that `commerciality of the find is yet to be proven', sources said. These norms would help in altering the stock exchanges, whenever there is a premature disclosure or a non-disclosure of development that merits disclosure, they added.
The move follows concerns expressed by SEBI over premature announcements of the in-place oil and gas reserves in new fields by the companies in this sector, which had an impact on the stock market and misled investors.
DGH, which already has set some standards in place, is now working with SEBI to relate this with the capital market, sources added.