Shah panel submits report on compensation from RIL to ONGC

New Delhi: Justice AP Shah Committee Wednesday submitted a 'comprehensive report' on the compensation Reliance Industries should pay to ONGC for producing state-run firm's gas for the past seven years.

The one-man Committee headed by Ajit Prakash Shah, former Chief Justice of Delhi High Court, submitted to Oil Minister Dharmendra Pradhan a report containing not just the compensation to be paid for ONGC's gas migrating to adjacent KG-D6 block of RIL in the Krishna Godavari basin, but also recommendations for avoiding such disputes in future.

As much as 11.122 billion cubic meters of ONGC gas had migrated from its Godavari-PML and KG-DWN-98/2 blocks to adjoining KG-D6 of RIL between April 1, 2009 and March 31, 2015. At prevailing prices, the gas was worth Rs 11,000 crore.

While ONGC's reservoirs have almost emptied, RIL continues to produce gas from D1&D3 fields in KG-D6 block, some of it being of ONGC.

Refusing to divulge contents of his report, Shah said the report is "comprehensive" and addresses all terms of references.

"The Committee has also recommended future course of action for the ministry," he said.

Pradhan said the ministry has one month to decide on the report. "Government will take appropriate action," he said.

"Justice AP Shah has submitted a comprehensive report on gas migration issue. He has preliminary briefed us on report," he said without giving details.

The panel has given "some observations" on the report of the independent expert DeGolyer & MacNaughton (D&M) that established reservoir continuity between the KG-D6 and contiguous ONGC operated blocks.

Asked if the Shah panel, like the D&M report, had established that gas from ONGC block had migrated to KG-D6 fields, Pradhan said, "Yes."

The Shah Committee has "detailed economic and legal implications" of the gas migration under the signed Production Sharing Contract, he said, adding that the report would be made public after the ministry has studied it.

"Allow me to get back to you with detailing of the report," he said.

D&M had in its November 2015 report indicated that as on March 31, 2015, 44.32 percent of the gas initially in place in Godavari PML and 34.71 percent in KG-DWN-98/2 (both of ONGC) had migrated to KG-D6 of RIL. The report projected a higher proportion of gas migration and its production through RIL operated KG-DWN-98/3 (KG-D6) block by end of 2019.

Pradhan said he had asked the Shah Committee was asked to look into legal, financial and contractual provisions on the gas migration row.

It was also asked to report any "acts of omission and commission" on part of all the stakeholders including RIL, ONGC, the Directorate General of Hydrocarbons and the government, he said.

RIL has 60 percent interest in KG-D6 block, while Niko Resources of Canada holds 10 percent stake. BP plc of UK holds the remaining 30 percent.

Government constituted the Shah panel on December 15, 2015 to look into the dispute between RIL and ONGC. The panel was to submit its report in three months but was given two extensions.

DeGolyer and MacNaughton (D&M), had in its November 30 report, established that reservoirs in ONGC's Krishna Godavari basin KG-DWN-98/2 (KG-D5) and the Godavari-PML are connected with Dhirubhai-1 and 3 (D1 & D3) field located in the KG-DWN- 98/3 (KG-D6) Block of RIL.

It states that as much as 11.122 billion cubic meters of ONGC gas has migrated from Godavari-PML and KG-DWN-98/2 to KG-D6. Of the 58.68 bcm of gas produced from KG-D6 block since April 1, 2009, 49.69 bcm belongs to RIL and 8.981 bcm could have come from ONGC's side, D&M said.

At gas price of USD 4.2 per million British thermal unit, the volume of gas belonging to ONGC which RIL has produced comes to USD 1.7 billion (Rs 11,055 crore).

When ONGC learnt of the gas migration in 2013, it sought government intervention. Failing to get a favourable action, it moved the Delhi High Court seeking compensation from RIL.

The Delhi High Court last year asked the government to decide on the issue within six months of receipt of the report of the independent consultant.

While KG-D6 is under production since 2009, field development plan for KG-DWN-98/2 or KG-D5 is yet to be approved.

On July 22, 2013, ONGC wrote to the Director General of Hydrocarbons (DGH) that there is a evidence of lateral continuity of gas pools of the ONGC blocks with KG-D6 pools. After discussions D&M was appointed in 2014 to carry out a third party study.

ONGC claimed that RIL had deliberately drilled wells close to the common boundary of the blocks and that some gas it pumped out was from its adjoining block.

RIL, on the other hand, has maintained that it has "scrupulously followed every aspect of the production sharing contract and has confined its petroleum operations within the (boundaries of its) KG-D6 block" in Krishna Godavari basin.

D&M estimated that ONGC's Godavari-PML had 14.209 bcm of gross in-place reserves and KG-D5 another 11.856 bcm. RIL's D&D3 fields held 80.697 bcm gross in-place reserves.

Of these, 12.80 bcm of Godavari-PML, 8.01 bcm of KG-D5 and 75.33 bcm of KG-D6 are connected, it said.

It estimated that 11.89 bcm of gas from ONGC blocks would have migrated to KG-D6 by January 1, 2017. This volume would rise to 12.713 bcm by May 1, 2019.

The volume of gas remaining after this would not be economically viable for ONGC to develop.

D&M was jointly appointed by ONGC and RIL to find if the neighbouring fields are connected.