Shah Committee to look into RIL, ONGC dispute: Pradhan

New Delhi: A one-man committee was constituted Wednesday to look into acts of omission and commission and recommend compensation to ONGC whose natural gas from Bay of Bengal block had flowed to adjoining fields of Reliance Industries.

The Justice (Retd) A P Shah panel has been constituted two weeks after US-based consultant D&M, in its final report, stated that as much as 11.122 billion cubic meters of natural gas, worth over Rs 11,000 crore, had migrated from idling Krishna Godavari fields of Oil and Natural Gas Corp (ONGC) to adjoining KG-D6 block of RIL.

"We have constituted the committee headed by A P Shah, Chairman of Law Commission, to look into the report of the D&M and recommend action to be taken by the government," Oil Minister Dharmendra Pradhan told PTI here.

The panel has been asked to look into legal, financial and contractual provisions and submit a report within three months.

It has also been 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.

According to the terms of reference, the Commission has been asked to "quantify the unfair enrichment, if any, to the contractors of the adjacent block KG-DWN-98/3 (KG-D6) and measures to prevent future unfair enrichment to these contractors on account of gas migration."

It has also been asked to "recommend action to be taken to make good the loss to ONGC/government on account of such unfair enrichment to the contractors."

Pradhan said the government will decide on future course of action based on the recommendations of the Committee.

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).

The Delhi High Court, on a petition filed by ONGC seeking compensation from RIL, asked the government to decide on the issue within six months of receipt of the report of the independent consultant.

The office order issued by Oil Ministry said RIL's KG-D6 block has a common boundary with ONGC's block KG-DWN-98/2 or KG-D5 and Godavari PML block.

While KG-D6 is under production since 2009, field development plan for 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," the order said, adding that after discussions D&M was appointed last year to carry out a third party study.

The Shah Committee has been asked "to recommend the future course of action to be taken on this issue in light of the findings contained in the report."

ONGC had in 2013 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.