OilMin moves CCEA on easing out gas disputes

a) Either to relinquish these discoveries;

b) Or to take up the development of discoveries after conducting drill stem test (DST) with 50 per cent cost recovery of these tests and no cost recovery for the tests carried out earlier;

c) Or else, to go ahead with the development of these discoveries without conducting DST but with ring fencing of the entire development activity (from the particular discovery),” says the CCEA note.

It says the proposed relaxation would monetise 1.65 trillion cubic feet of gas with RIL valued at $6.941 billion and nearly 1.8 TCF with ONGC valued at $7.56 billion which are lying idle as the DGH is insisting on their relinquishment instead of accepting their Declaration of Commerciality (DOC).

“DoCs have been submitted for all these discoveries but have not been reviewed by the Management Committee for want of surface flow data from the contractors,” says the note.

Since 2010, the DGH has been insisting on conventional testing — DST as against modular dynamic testing (MDT) — to validate estimates of gas reserves from these blocks before accepting the operator’s DOC. Only when the DOC is accepted can an operator submit a field development plan to start oil and gas production.

However, a 2007 DGH notification on its website does not insist on DST. It says that “in deepwater blocks, wireline flow test like MDT, Reservoir Characterisation Instrument and Rotating Drum Attrition Tester or equivalent test will be considered for declaring a new hydrocarbon discovery as a discovery of potential commercial interest, as is being practiced internationally”.

Using that notification, ONGC contested before the ministry last July that DGH guidelines were “neither modified at any point of time since 2007 nor was it ever conveyed to ONGC while reporting various discoveries that such tests are not enough to declare the commerciality of a discovery”.

It argued that production from three of its blocks would get hampered as demanding DST data so late in the process was “not practical as carrying out conventional tests or DST in deepwater areas in old wells will have huge cost implications and will also lead to time overrun”.

ONGC also cited global practices to demonstrate that worldwide, the onus was on operators to ascertain the commerciality of their finds and put in money for development and production.

Based on ONGC’s arguments, the ministry felt that contractors should be given the choice of use of technology, but as a safety measure, it has put caveats on the cost recovery allowed from oil and gas revenues before profits are shared with the government.