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Government may give ONGC, Reliance Industries Ltd disputed gas sites to develop

These discoveries have at least 4 trillion cubic feet (TCF) by way of reserves, enough to generate 4,000 MW of power for two decades.

, ET Bureau|
Dec 25, 2014, 06.22 AM IST
NEW DELHI: The government may soon allow ONGC and Reliance Industries Ltd (RIL) to develop six gas discoveries, which have been unexploited for several years because of disputes over methods to confirm their commercial viability.

These discoveries have at least 4 trillion cubic feet (TCF) by way of reserves, enough to generate 4,000 MW of power for two decades, government and industry sources said.

The oil ministry has prepared a framework for the cabinet to resolve these dispute, these sources said.

The ministry is in favour of allowing contractors to conduct any appropriate test. But in case the contractor gets the assessment wrong, it will be barred from recovering expenditure incurred in developing the field, sources said.

Testing the commercial viability of a discovery is an important step in the development of oil and gas fields and the contractor’s estimates of expenditure and output are based on the test results.

The ministry plans to allow ONGC and RIL to develop at least six discoveries in various blocks in the Krishna-Godavari basin. In case of RIL, the discoveries were earlier rejected by the Directorate General of Hydrocarbons (DGH) as the company resisted carrying out a test known as the drill-stem test (DST) to establish that the discoveries are economically viable.

DGH officials argued that DST is a must because it is more predictable and precise in estimating oil and gas reserves.

Explorers have disputed DGH’s stand citing the production sharing contract (PSC), which left selection of testing methods to the technical judgment of the contractor, sources said.

RIL and ONGC chose a modern and less expensive method, known as the Modular Dynamic Test (MDT) to prove viability of their discoveries.

Companies argued that DGH earlier certified dozens of discoveries on the basis of MDT. However in October 2010. after sitting on their proposals for over eight months, DGH insisted on the DST route, sources said. In July 2012, RIL agreed to the DST method on the insistence of DGH. But, it missed the timeline for developing the discoveries because of prolonged delays in getting approvals, sources said. RIL’s three discoveries are D-29, D-30 and D-31 in the KG-D6 block.

A similar exemption will be given to ONGC, which is also in a similar dispute with DGH. Its UD-1 discovery alone holds about 2.8 trillion cubic feet of gas reserves and other two discoveries (D and E) have estimated 587.6 billion cubic feet of gas.

The move may also give fresh lease of life to about half-a-dozen more gas discoveries in Reliance’s NEC-25 and KGDWN-2003/1 blocks in the east coast, sources said.

“As these are matters concerning country’s energy security, the new government has decided to reconsider the matter,” a government source said.

In April this year, former Oil Minister Veerappa Moily had circulated a Cabinet note intended to resolve such disputes.
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