Contractors sharing a common reserve will have to develop the oil field jointly: Govt

Contractors sharing a common reserve will have to develop the oil field jointly: Govt

The government will order joint development of oil and gas fields if it is found that the fields being developed by different contractors share a common reservoir, the disagreement of the contractors notwithstanding, according to a draft contract under the new exploration policy. This offers a glimpse of how the state aims to handle in future disputes such as that between state-run ONGC and Reliance Industries over a common reservoir.

The government unveiled Hydrocarbon Exploration and Licensing Policy (HELP) last year, which replaces the New Exploration Licensing Policy (NELP) that governed India’s oil and gas exploration for more than a decade. HELP offers freedom to market oil and gas, and provides for a revenue-sharing contract that replaces the contentious profit sharing provision under NELP. A draft model revenue sharing contract has just been opened to public consultation.

NELP provided for a situation where a reservoir extends below two discovery areas under two separate contractors. HELP also provides for a condition where a contract area is already being developed – a situation similar to RIL’s producing field in the KG Basin that partly shares the reservoir with the undeveloped field of ONGC.

It took years to establish that the reservoir underlying the fields of RIL and ONGC were connected but that didn’t result in a joint development proposal. Last year, an official panel found that RIL had unjustly gained by producing gas that had migrated to its field from ONGC’s adjacent fields. Following this, the government sought $1.55 billion in compensation from RIL, which in turn legally challenged it. Read more


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