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A high-profile clash between India's biggest oil companies, sparked by ONGC's allegation that Reliance Industries (RIL) had drained out gas from its idling deepsea gas fields adjoining and possibly connected to RIL's KG-D6 block, is approaching its climax. On October 8, US-based DeGolyer and MacNaughton (D&M) — an independent expert appointed to examine the continuity of reservoirs —is expected to submit its report to the ministry of petroleum and natural gas (MoPNG).
The dispute was sparked by ONGC's claims in 2013 that RIL had deliberately drilled wells close to the common boundary of the blocks and that some gas it pumped out was from the state-firm's adjoining block. RIL has maintained it has abided by production sharing contract (PSC) and done only what was officially authorised "RIL, as a prudent operator, has followed all provision of PSC.
Every activity has been undertaken following extensive discussion with and approval of the Management Committee (MC) including MoPNG and the directorate general of hydrocarbons (DGH) officials. Following engagement of an independent expert agency (D&M) under the supervision of DGH, RIL has proactively cooperated in the process and is awaiting its finding," a spokesman for Reliance Industries said in response to a detailed questionnaire from ET.
"We have to protect interests of our organisation and report will be finalised on Oct 8. All data is in the knowledge of independent agency, I can't comment on this," ONGC Chairman and Managing Director Dinesh K Sarraf told ET. Industry sources close to RIL say examining the technical aspects of the gas reservoir is only one aspect.
They say it is crucial to consider that RIL had drilled wells within its own boundary, spent over Rs 40,000 crore to develop the field and produced gas, a national resource, unlike ONGC which has not developed the field so far. Stakeholders, including ONGC, RIL and DGH, had a meeting in the US with D&M from September 16-18. In this session, they deliberated on reservoir data, connectivity of reservoirs across the block boundaries and estimates of gas volumes in blocks operated by ONGC and RIL, a top source familiar with the case told ET.
D&M told them that up to March 31, 2015, RIL had drawn 58.67 billion cubic metres (bcm), out of which ONGC claims 11.95 bcm as its share, the source cited above said. It may not be possible to extract even minimum 75 bcf of gas; it will not be viable, explained one official privy to the communication.
Sources close to RIL contest this. "No one can claim title to gas; RIL has produced this gas and not ONGC. This is all in cognisance of government. How can they claim 12 bcm? No one can predict migration or drainage. This is a geological occurrence surprise, and if connectivity is there, it is not something new, it is happening the world over, where stakeholders jointly develop fields. And why did they not inform RIL in 2006, when fields were being developed?" said one of the sources.
Expert Report While the final contours of the D&M report is not known, many sources, whom ET spoke to, suggest that the report might uphold some of ONGC's claims while rejecting others.
On September 23, D&M indicated to DGH that so far it has not been able to identify any unconnected or undepleted area in ONGC's block where viable exploration could be carried out, ET has learnt. Also the report may establish the continuity of channels and connectivity of reservoirs across the block boundaries, a top source with direct knowledge of the matter told ET.
For its part, ONGC has sought to strengthen its own case with data on how pressure in its field has declined. It has submitted a study conducted by oil services company Schlumberger to DGH, which was further shared with D&M and RIL. On April 19, Schlumberger forwarded its test report to ONGC that suggested reduced pressure.
This test was conducted from April 2 to April 7 and the report finalised and shared with DGH and RIL. "The original drilling was done in 2005-06, when gas pressure was found to be around 3900 PSI (pounds per square inches), and now it is around 1200, and gas flow was over 4 lakh cubic metres per day, now there is no gas left, and water is all over the field," claimed a top ONGC source.
The industry executives quoted earlier agreed that the reservoir may be depleted, but said that RIL can hardly be blamed for it. "There may not be any gas left, and pressure has reduced but why blame RIL? The drilling was done in RIL's boundary, and designs were approved by DGH. When vertical drilling is done, 2-3 km below the sea bed, there are technical challenges, then side tracking is done, that too is approved by DGH.
We drill to achieve maximised natural drainage to justify the well. And once the gas is produced, voids are filled, RIL knows nothing about migration. If RIL was so intelligent, then why would its initial estimates of 10 tcf of gas go wrong, since gas reserves now revealed are around 3 tcf." It also appears that the final D&M report could also puncture ONGC's claims of gas drainage, worth an estimated Rs 30,000 crore. The state explorer had, in 2014, claimed that from 2009 to 2013, RIL had siphoned off around 18 bcm of gas, and that 50% of the drawn gas belongs to ONGC.
"The value of the disputed gas could be between Rs 10,000 crore and Rs 12,000 crore, if it (ONGC's claims) is established," said another top official, who has access to the details of the dispute. In May this year, ONGC had moved Delhi High Court and alleged that RIL had siphoned off natural gas from its fields adjacent to the KG-D6 block in the Krishna Godavari basin.
According to ONGC, its Godavari Block (known as G-4) and discovery block KGDWN-98/2 are contiguous to RILowned KG-DWN-98/3 (KG-D6). The Economic Times has reviewed a letter written by ONGC Director (Exploration) NK Verma to the ministry of petroleum. "The position of ONGC is that there is a continuity of discoveries made by ONGC in its Godavari PML DWN-98/3 block. Our study suggests that RIL's well D6-A5, D6-A9,D6-B8 are drilled on the extension of G4-2,G4-3 AND D1 pools of ONGC respectively.
As these pools are extending across both the blocks, there is possibility that pools of KG-DWN-98/2 and G4 are being drained through wells drilled in D6 block, as these wells are drilled close to/on block boundary," the letter reads.
RIL's D6 block in the Krishna-Godavari basin borders ONGC's DWN 98/2 Block and ONGC's G4 gas field is also near RIL's block. ONGC, which has around 11 discoveries in the region, plans to develop G4 and KG-DWN blocks by 2017 and has over 4 trillion cubic feet of gas reserves in the KGDWN-98/2 block with an estimated output of 6-9 million standard cubic metres per day of gas.
On September 10, the Delhi High Court disposed of ONGC's petition and directed government to take a decision after it receives report from an independent panel set up to arbitrate between RIL and ONGC.
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