US consultant DeGolyer and MacNaughton (D&M) has submitted its report on the dispute between Mukesh Ambani's Reliance Industries Ltd and public sector company ONGC.
A senior official of the Ministry of Petroleum and Natural Gas at the sidelines of an industry event said that the D&M report has been submitted to the Ministry. Sources privy to the report said that D&M has found that as much as 15 per cent of the gas RIL and its partners pumped out of their block in the Krishna Godavari basin could belong to ONGC.
The report has also confirmed ‘reservoir continuity’ or in other words the absence of any barriers between the blocks of the two parties. The reserves in the D-1 and D-3 fields of the Reliance-BP-Niko KG D6 block total 2.9 trillion cubic feet, of which 2.1 trillion cubic feet has already been extracted. During the final meeting of the stakeholders and D&M, it emerged that of the total reserves in D-1 and D-3, about 15 per cent could belong to ONGC. Sources privy to the development also said that since the fields have been producing from 2009, a joint development of the fields is not possible as there is a residual life of just three to four years.
ONGC is expected to seek not just existing benefits but also compensation for the previous years. An internal team of ONGC is working on the valuation of the gas, and it will have to consider the investments already made by RIL and its partners as well as what will be the right price of the gas.
RIL has maintained that it has gone by the production sharing contract (PSC) which mandates that any activity undertaken by a contractor can only be done after approval of the block Management Committee. The management committee oversees the operations of the block and has representatives from the Ministry and Directorate General of Hydrocarbons with veto power.
The Ministry of Petroleum and Natural Gas will study the report before reaching a conclusion. However, the Delhi High Court had directed the Ministry to look for a conclusion within six months of submission of the report. The ministry has six months till June 1, 2016, to decide on it.
ONGC had in 2013 claimed that RIL had deliberately drilled wells close to the common boundary of the blocks and that some gas it pumped out was from its adjoining block.
The board of Oil and Natural Gas Corporation (ONGC), led by its vocal independent directors and government nominee, had forced the firm’s management to take legal recourse that has now led to a damning finding that Rs 11,000 crore worth of its natural gas had flowed to neighbouring block of Reliance Industries (RIL).
It all started in July 2013 when a review of the firm’s eastern offshore oil and gas campaign by the just-appointed director (exploration), Narendra Kumar Verma, led to suspicion that ONGC’s Krishna Godavari basin block KG-DWN-98/2 and Godavari-PML are connected with adjoining KG-D6 block of RIL.
Immediately after the review, ONGC wrote to the directorate general of hydrocarbons (DGH) seeking data of RIL block, sources with direct knowledge of the development said.
Not much moved on the ONGC request for next few months. When in March 2014, Dinesh K Sarraf took over as the chairman and managing director of ONGC, he decided to inform the board of the possible dispute.
The board, however, asked for a proper presentation on the issue and when that was made on April 24, 2014, independent directors, including Om Prakash Bhatt, former State Bank of India Chairman, and Samir Kumar Barua of IIM-Ahmedabad, sought all steps including legal recourse to protect the company’s interests, they said.
When it was stated legal recourse would also mean making the government a party to the dispute, Giridhar Aramane, who was then joint secretary (exploration) in the oil ministry and government nominee director on ONGC board, said the state-owned company should not hesitate.
Aramane, sources said, pressed ONGC to take action, including making government a party to the dispute as he felt government was an interested party.
Then oil secretary Saurabh Chandra was consulted and a writ petition was filed in the Delhi High Court against RIL and the Government of India in May.
Then Oil Minister M Veerappa Moily, however, had not taken kindly to ONGC making the government a party, calling it “signs of systemic failure” and ordered an enquiry and to “fix accountability either within the ministry, DGH or ONGC for mishandling the matter and allowing it to escalate to this level.”
The high court directed appointment of an independent domain expert to establish ONGC’s contention.
DeGolyer and MacNaughton (D&M) was appointed and the final report of this US-based consultant stated that as much as 11.122 billion cubic meters of ONGC gas, had migrated from idling Krishna Godavari fields of Oil and Natural Gas Corp (ONGC) to adjoining KG-D6 block of RIL. At gas price of USD 4.2 per million BTU, this volume of gas belonging to ONGC which RIL has produced is worth a value of USD 1.7 billion (Rs 11,055 crore).
The report, sources said, is now with the DGH which is doing an internal study before the issue goes to the ministry for adjudicating if ONGC has to be paid any compensation.
Two weeks after the report was submitted, a one-man committee has been constituted, the Justice (Retd) A P Shah panel, to look into acts of omission and commission and recommend compensation to ONGC, whose natural gas from Bay of Bengal block had flowed to adjoining fields of RIL.
“We have constituted the committee headed by A P Shah, Chairman of Law Commission, to look into the report of the D&M and recommend action to be taken by the government,” Oil Minister Dharmendra Pradhan said. The panel has been asked to look into legal, financial and contractual provisions and submit a report within three months.
It has also been asked to report any “acts of omission and commission” on part of all the stakeholders including RIL, ONGC, the Directorate General of Hydrocarbons and the government, he said. According to the terms of reference, the Commission has been asked to “quantify the unfair enrichment, if any, to the contractors of the adjacent block KG-DWN-98/3 (KG-D6) and measures to prevent future unfair enrichment to these contractors on account of gas migration.” It has also been asked to “recommend action to be taken to make good the loss to ONGC/government on account of such unfair enrichment to the contractors.” Pradhan said the government will decide on future course of action based on the recommendations of the Committee. DeGolyer and MacNaughton (D&M), had in its November 30 report, established that reservoirs in ONGC’s Krishna Godavari basin KG-DWN-98/2 (KG-D5) and the Godavari-PML are connected with Dhirubhai-1 and 3 (D1 & D3) field located in the KG-DWN-98/3 (KG-D6) Block of RIL. Of the 58.68 bcm of gas produced from KG-D6 block since April 1, 2009, 49.69 bcm belongs to RIL and 8.981 bcm could have come from ONGC’s side, D&M said.
The office order issued by Oil Ministry said RIL’s KG-D6 block has a common boundary with ONGC’s block KG-DWN-98/2 or KG-D5 and Godavari PML block. While KG-D6 is under production since 2009, field development plan for KG-D5 is yet to be approved. “On July 22, 2013, ONGC wrote to the Director General of Hydrocarbons (DGH) that there is a evidence of lateral continuity of gas pools of the ONGC blocks with KG-D6 pools,” the order said, adding that after discussions D&M was appointed last year to carry out a third party study. The Shah Committee has been asked “to recommend the future course of action to be taken on this issue in light of the findings contained in the report.”
A senior official of the Ministry of Petroleum and Natural Gas at the sidelines of an industry event said that the D&M report has been submitted to the Ministry. Sources privy to the report said that D&M has found that as much as 15 per cent of the gas RIL and its partners pumped out of their block in the Krishna Godavari basin could belong to ONGC.
The report has also confirmed ‘reservoir continuity’ or in other words the absence of any barriers between the blocks of the two parties. The reserves in the D-1 and D-3 fields of the Reliance-BP-Niko KG D6 block total 2.9 trillion cubic feet, of which 2.1 trillion cubic feet has already been extracted. During the final meeting of the stakeholders and D&M, it emerged that of the total reserves in D-1 and D-3, about 15 per cent could belong to ONGC. Sources privy to the development also said that since the fields have been producing from 2009, a joint development of the fields is not possible as there is a residual life of just three to four years.
ONGC is expected to seek not just existing benefits but also compensation for the previous years. An internal team of ONGC is working on the valuation of the gas, and it will have to consider the investments already made by RIL and its partners as well as what will be the right price of the gas.
RIL has maintained that it has gone by the production sharing contract (PSC) which mandates that any activity undertaken by a contractor can only be done after approval of the block Management Committee. The management committee oversees the operations of the block and has representatives from the Ministry and Directorate General of Hydrocarbons with veto power.
The Ministry of Petroleum and Natural Gas will study the report before reaching a conclusion. However, the Delhi High Court had directed the Ministry to look for a conclusion within six months of submission of the report. The ministry has six months till June 1, 2016, to decide on it.
ONGC had in 2013 claimed that RIL had deliberately drilled wells close to the common boundary of the blocks and that some gas it pumped out was from its adjoining block.
The board of Oil and Natural Gas Corporation (ONGC), led by its vocal independent directors and government nominee, had forced the firm’s management to take legal recourse that has now led to a damning finding that Rs 11,000 crore worth of its natural gas had flowed to neighbouring block of Reliance Industries (RIL).
It all started in July 2013 when a review of the firm’s eastern offshore oil and gas campaign by the just-appointed director (exploration), Narendra Kumar Verma, led to suspicion that ONGC’s Krishna Godavari basin block KG-DWN-98/2 and Godavari-PML are connected with adjoining KG-D6 block of RIL.
Immediately after the review, ONGC wrote to the directorate general of hydrocarbons (DGH) seeking data of RIL block, sources with direct knowledge of the development said.
Not much moved on the ONGC request for next few months. When in March 2014, Dinesh K Sarraf took over as the chairman and managing director of ONGC, he decided to inform the board of the possible dispute.
The board, however, asked for a proper presentation on the issue and when that was made on April 24, 2014, independent directors, including Om Prakash Bhatt, former State Bank of India Chairman, and Samir Kumar Barua of IIM-Ahmedabad, sought all steps including legal recourse to protect the company’s interests, they said.
When it was stated legal recourse would also mean making the government a party to the dispute, Giridhar Aramane, who was then joint secretary (exploration) in the oil ministry and government nominee director on ONGC board, said the state-owned company should not hesitate.
Aramane, sources said, pressed ONGC to take action, including making government a party to the dispute as he felt government was an interested party.
Then oil secretary Saurabh Chandra was consulted and a writ petition was filed in the Delhi High Court against RIL and the Government of India in May.
Then Oil Minister M Veerappa Moily, however, had not taken kindly to ONGC making the government a party, calling it “signs of systemic failure” and ordered an enquiry and to “fix accountability either within the ministry, DGH or ONGC for mishandling the matter and allowing it to escalate to this level.”
The high court directed appointment of an independent domain expert to establish ONGC’s contention.
DeGolyer and MacNaughton (D&M) was appointed and the final report of this US-based consultant stated that as much as 11.122 billion cubic meters of ONGC gas, had migrated from idling Krishna Godavari fields of Oil and Natural Gas Corp (ONGC) to adjoining KG-D6 block of RIL. At gas price of USD 4.2 per million BTU, this volume of gas belonging to ONGC which RIL has produced is worth a value of USD 1.7 billion (Rs 11,055 crore).
The report, sources said, is now with the DGH which is doing an internal study before the issue goes to the ministry for adjudicating if ONGC has to be paid any compensation.
Two weeks after the report was submitted, a one-man committee has been constituted, the Justice (Retd) A P Shah panel, to look into acts of omission and commission and recommend compensation to ONGC, whose natural gas from Bay of Bengal block had flowed to adjoining fields of RIL.
“We have constituted the committee headed by A P Shah, Chairman of Law Commission, to look into the report of the D&M and recommend action to be taken by the government,” Oil Minister Dharmendra Pradhan said. The panel has been asked to look into legal, financial and contractual provisions and submit a report within three months.
It has also been asked to report any “acts of omission and commission” on part of all the stakeholders including RIL, ONGC, the Directorate General of Hydrocarbons and the government, he said. According to the terms of reference, the Commission has been asked to “quantify the unfair enrichment, if any, to the contractors of the adjacent block KG-DWN-98/3 (KG-D6) and measures to prevent future unfair enrichment to these contractors on account of gas migration.” It has also been asked to “recommend action to be taken to make good the loss to ONGC/government on account of such unfair enrichment to the contractors.” Pradhan said the government will decide on future course of action based on the recommendations of the Committee. DeGolyer and MacNaughton (D&M), had in its November 30 report, established that reservoirs in ONGC’s Krishna Godavari basin KG-DWN-98/2 (KG-D5) and the Godavari-PML are connected with Dhirubhai-1 and 3 (D1 & D3) field located in the KG-DWN-98/3 (KG-D6) Block of RIL. Of the 58.68 bcm of gas produced from KG-D6 block since April 1, 2009, 49.69 bcm belongs to RIL and 8.981 bcm could have come from ONGC’s side, D&M said.
The office order issued by Oil Ministry said RIL’s KG-D6 block has a common boundary with ONGC’s block KG-DWN-98/2 or KG-D5 and Godavari PML block. While KG-D6 is under production since 2009, field development plan for KG-D5 is yet to be approved. “On July 22, 2013, ONGC wrote to the Director General of Hydrocarbons (DGH) that there is a evidence of lateral continuity of gas pools of the ONGC blocks with KG-D6 pools,” the order said, adding that after discussions D&M was appointed last year to carry out a third party study. The Shah Committee has been asked “to recommend the future course of action to be taken on this issue in light of the findings contained in the report.”
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