Why did ONGC Keep Quiet about Gas Migration for Eight Years?

ONGC may have to share a significant part of about $11 billion spent by Reliance Industries in developing Krishna-Godavari basin gas fields before the public sector can claim its share in the KG-D6 gas that shifted from its blocks to adjacent block operated by Reliance, government sources said.

A recent report of American consultant DeGolyer & Mac-Naughton (D&M) has confirmed that some natural gas has migrated from ONGC’s two blocks to adjacent producing gas fields of Reliance, which is estimated around $1.7 billion.

The migration is mainly because the underground reservoirs seem connected and ONGC has delayed production from its blocks, sources in the Directorate General of Hydrocarbons (DGH) said. DGH is technical adviser of the oil ministry and custodian of India’s oil and gas resources.

“Government may ask investigative agencies to conduct an inquiry to ascertain whether this delay was deliberate? It is intriguing that ONGC kept quiet on this matter till July 2013 while the G4 block is with it since 1997 and it got control over the 98/2 block since 2005,”a government source said requesting anonymity.

It is not a unique situation as the matter will be settled through a gas balancing agreement, which is an internationally accepted practice. In India such agreements do exist in Hazira and OLPAD gas fields in Gujarat where underground gas reservoirs turned out to be common, DGH and oil ministry sources said. Email queries sent to ONGC and Reliance did not elicit any response.

DGH sources blamed ONGC for inordinate delay. ONGC has been ignorant and has now chosen to assert to hide its failure of raising its claim after several years, which otherwise implies that it allowed the situation to happen for the reasons best known to the company, DGH sources said.

The Godavari block (G4) was awarded to ONGC without competitive bid in 1997 where it had discovered at least three discoveries. It bought 90% of the other block (98/2) from Cairn in 2005 and remaining 10% in 2012, where it announced eight discoveries. While Reliance got its KG-D6 block in 2000 and started gas production in April 2009.

DGH sources said that perhaps ONGC never intended to produce gas from its block because of immense technical difficulties and wanted easy returns by claiming a share in the gas produced by Reliance.

(Also published in Amar Ujala http://epaper.amarujala.com/dl/20151228/11.html?format=pdf)

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