Monday, December 7, 2015

Grand Theft Geology- Report Indicts Reliance Of Pilfering Gas From ONGC Reservoir

Paranjoy Guha Thakurta explains in a detailed article the shenanigans and the disputes over the exploitation of natural gas in the Krishna Godavari basin.

The Krishna-Godavari basin offshore Bay of Bengal composed of Late Mesozoic to Cenozoic deltaic-marine sequences has rich natural gas reservoirs  . Reliance Industries as well as the public sector ONGC are exploring and producing natural gas from adjoining areas. Turns out that in one area the underlying reservoirs are continuous, and ONGC suspected a couple of years ago that Reliance Industries realizing this geological situation drilled wells very close to the common boundary of the blocks. As a result of producing these wells as much as 11 billion cubic meters (bcm) of gas has flowed from the reservoir under ONGC controlled areas into Reliance control. Out of that, Reliance in an unauthorized manner, has sucked out 8.9 bcm of gas worth about Rs 11,000 crore  (~ $1.7 billion).

If fact, the large migration of gas from ONGC controlled reservoir into Reliance controlled reservoir means that it would no longer be economically viable for ONGC  to develop this particular field.

That is the finding of an independent consultant DeGolyer and MacNaughton (D&M) based out of Dallas, Texas, in the US, which was hired to submit a technical report on the ONGC claim which Reliance had disputed.

ONGC has also taken the Government of India to court, naming the Ministry of Petroleum and Natural Gas (MoPNG) and the Directorate-General of Hydrocarbons (DGH) as respondents accusing these agencies of failing to be vigilant in taking precautionary measures.

ONGC claimed in its writ petition:

Pertinently, four wells have been drilled by Respondent No 3 (RIL) within distances ranging within 50 m (metres) to about 350 m from the blocks of (the) petitioner (ONGC) and wells have been so drilled and constructed that there is a pre-planned and calculated slant/angular incline towards the gas reserves of (the) petitioner with a clear idea to tap the same.

According to ONGC, its nomination block, Godavari PML (G4) and discovery block, KG-D5 under the New Exploration Licensing Policy (NELP)-1 are contiguous to the RIL-operated NELP-1 block KG-D6. The public sector undertaking (PSU) had said that it wanted a “truly independent” agency to examine its contention that the Mukesh Ambani-led RIL may have drawn natural gas worth up to Rs 30,000 crore from ONGC’s fields adjacent to the ones in the KG-D6 block where the contracting company controlled by RIL operates.

all this does not reflect well on a government eager to invite foreign investments and collaboration-

Sarma is correctly of the view that management and enforcement of contracts are crucial to good governance in any sector, including the oil and gas exploration industry where the natural resources extracted are not just high in value and also critical to the country’s energy security. A flawed and inadequate PSC between RIL and the MoPNG has been greatly responsible for many of the problems that have been encountered during the exploration and extraction of gas from the KG basin. In the case of alleged theft, the management committee, which included representatives of the ministry, apparently acquiesced in whatever RIL did, and the contractual provisions for joint-management of the gas fields and imposition of penalties were never invoked. This, Sarma points out, does not augur well for a country that is aggressive inviting foreign investments, including investments in the oil and gas industry.

It should also be noted that government-owned companies like ONGC are expected to function independently and safeguard the interests of the shareholders, which include the people of India. The two really “independent” former directors of ONGC persuaded the corporation to approach the Delhi High Court but the ministry under Moily tried to prevent this from happening—it is truly ironic that the government as the major shareholder of ONGC should actively work against its interests and try and cause harm to itself.

The entire article is worth reading.

.. and more on the troubled involvement of Reliance Industries with natural gas exploitation in the Krishna Godavari basin .

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