Date:20/02/2007 URL: http://www.thehindubusinessline.com/2007/02/20/stories/2007022005060100.htm

DGH disallows ONGC's gas discovery in KG basin

Richa Mishra

Company to contest regulator's views, seeks third-party audit

Inadequate flow
Discovery has been disallowed since the gas was not flowing to the surface.
The production sharing contract does not agree to considering something as a discovery if it does not flow to the surface.

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New Delhi Feb. 19 Oil and Natural Gas Corporation's (ONGC) recent gas discovery in the Krishna-Godavari Basin has been disallowed by the Directorate General of Hydrocarbons (DGH). ONGC's exploration team had last year struck natural gas in ultra-deepwater well UD1 in the Krishna-Godavari block KG-DWN-98/2.

The Director General of Hydrocarbons, Mr V.K. Sibal, told Business Line, "We have written to the company three to four days back disallowing the discovery, as the company has abandoned the well. Besides, the discovery has been disallowed since the gas was not flowing to the surface. The production sharing contract (PSC) does not agree to considering something as a discovery if it does not flow to the surface."

Indications are that ONGC would contest the DGH views. A top company official who preferred to be unnamed said, "How can the discovery be disallowed? The DGH could object to the commerciality of the find. Let there be a third-party audit before any such decision is taken."

The official said, "The company carries out its activities in the New Exploration Licensing Policy (NELP) blocks as per laid down PSC norms. In adherence to the norms, in the well UD-1, block KG-DWN-98/2, ONGC notified DGH regarding modular dynamic test (MDT) in the interval 5,243.5 - 5,304 m, which was conducted in the presence of DGH representative during December 7-15, 2006. The interpreted presence of hydrocarbon was validated through this test."

After further completion of further tests the discovery of Non-Associated Natural Gas (NANG) was brought to the notice of DGH on December 23, the official said. ONGC, in consultation with its partner Cairn Energy India Ltd, submitted its potential commercial interest, meriting appraisal, in the prescribed format to the DGH. The hydrocarbon in-place estimated as per standard practice is in a range of 2.09 TCF-14.76 TCF.

The official further informed that ONGC has made a number of discoveries earlier in this block, which have been accepted by DGH. "What one needs to remember is that all exploratory wells are abandoned at one stage. Besides, we cannot keep our drilling vessels idle. The company has drilled up to the target well, and it was found that the reservoirs are tight. The fracture in the segment is water based," he added.

The aerial extent of the prospect — 55 km off the Andhra Pradesh coast on the eastern shoreline — is 600 sq. km at basement level. ONGC bought 90 per cent operator interest in the block in September 2003 from Cairn Energy India, which was awarded the deepwater block under the first round of NELP.