Government awaits D&M’s final report to resolve ONGC-Reliance KG basin row

NEW DELHI: The government will examine whether Reliance Industries deliberately extracted gas from the neighbouring block of the Oil and Natural Gas Corp in the KG basin after it receives the final report on the dispute from an international consultant in about three weeks.

Officials said the issue was complex and the oil ministry will consider various points raised by Reliance and ONGC as well as the report of consultancy DeGolyer and Mac-Naughton (D&M), appointed to assess ONGC's allegation that RIL stole the state firm's gas, to find a way to resolve the dispute. D&M submitted its draft report to the Directorate General of Hydrocarbons (DGH), the upstream regulator, and the two firms late last week. It will prepare the final report after receiving the comments from companies.

The final report will also be submitted to the government, which will then examine it and look for a resolution within six months as directed by the Delhi High Court.

Either party not satisfied with the government's proposed solution can then approach the court.

Two years back, ONGC had alleged that Reliance had deliberately drilled wells close to the common boundary of the adjoining blocks owned by the two firms and drained out some gas from its block.

On October 2, ET first reported that the consultant found that the two blocks were connected and the value of the disputed gas could be around Rs 10,000 crore.

The government will use technical experts to examine and establish the role Reliance may have played leading to the dispute.

"We will have to examine whether Reliance actually did something with an intent to illegally draw ONGC's gas or if it was just an outcome of the geology. This is also a fact that Reliance's drilling plans were approved by the DGH and if every well was drilled according to the approved plan, it will not be easy to conclude who is to be blamed," said an official. "But if Reliance has exceeded the plan and done something wrong, naturally it will be held guilty."

The field development plans always have to be approved by the DGH, the technical arm of the oil ministry, before being implemented.

Contiguous reserves are not unique to India and in such situations usually operators of the two blocks enter into some arrangement to bear the cost and the output. But since the discovery that the Reliance and ONGC's blocks are connected has come after some gas has already been pumped out, there will have to be a mechanism for compensation to the original owner of the gas.

"We will have to find a way regarding the compensation," the official said, shrugging aside suggestions that solution might be difficult to achieve since the current production sharing contracts between the government and the operators don't provide for such situations.