Has public sector giant ONGC emerged as the smarter investor in the ongoing dispute with Mukesh Ambani’s Reliance Industries Ltd (RIL) on east coast oil and gas discoveries? It does seem thus, if those tracking the ongoing dispute between the two corporate giants are to be believed.
American consultant DeGolyer and MacNaughton (D&M), which inquired into ONGC’s charges of RIL pumping out gas from its adjacent block in the Krishna-Godavari (KG) basin, confirms reservoir continuity — the absence of any barrier between the two blocks — and says almost 15 per cent of ONGC gas could have been pumped out by RIL and its partners.
However, it is silent on the valuation, which is based on reserves in case of oil and gas fields. While the reserves of RIL-BP-Niko’s KG D6 block were known, the consultant is understood to have termed ONGC’s resources as only ‘contingent’, in the absence of any development plan and production yet to start.
The reserves in the D-1 and D-3 fields of the Reliance-BP-Niko KG D6 block total 2.9 trillion cubic feet, of which 2.1 trillion cubic feet has already been extracted. In commercial terms it could also be interpreted as produce from the public sector company’s area having migrated into the RIL block and earned revenues for the latter.
Some see ONGC as a smarter player in this case, as now D&M has also described the KG basin reservoir as ‘complex’. It further observed that migration took place because ONGC did not undertake any development work, a person closely associated with the development told BusinessLine .
“Could be that ONGC was able to differentiate between commercial and non-commercial viability of resources available in the east coast blocks…and controlled its risk taking appetite, while RIL went ahead and invested millions of dollars, and now the assessment has gone wrong,” the person said.
Besides, sources associated with both RIL and ONGC maintained, deciding on valuation is not just simple math involving gas price multiplied by reserves and exchange rate. There are multiple variables involved, including technical and commercial feasibility, operating and capital expenditures etc., they said.
The buck now stops with the Ministry for Petroleum & Natural Gas. Will it appoint a third party expert to study the report and seek legal opinion as contractual agreements are involved? Both the contractors (RIL and its partners, and ONGC) and the Ministry agree that the task ahead is not easy. Meetings with the parties involved are expected once the Ministry studies the report.
“While the ideal situation would be an acceptable solution for all, we will reserve our rights,” those associated with the private contractor said.