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ONGC officials were always apprehensive that gas from the company’s KG-98/2 field, in the Bay of Bengal, was flowing down to Reliance Industries Ltd.’s D-6 block. If true, this may impact the production potential of the state owned explorer, which is three years away from developing the KG field. Such disputes are common in the oil and gas industry, as reservoirs are located miles under the earth. ONGC has faced such situations twice in the past.

The advantage often goes to the first mover. And, the late entrant ends up facing a lower-than-average hydrostatic pressure in the wells, impacting output. From the point of reservoir management and optimal extraction of natural resources from a reservoir, it is imperative that both sides join hands. Ideally, such means can be best achieved by a regulator, which can force all sides to play by the rules.But the Indian upstream regulator, Directorate General of Hydrocarbons (DGH), may be keen to leave it to the players to settle the dispute. Indeed, some explorers have been quick to settle their disputes.

The Niko-led consortium at CB-X in Cambay offshore, for example, settled its dispute with Cairn, which operated the Gauri field in the same basin. Niko, which started exploiting the resources first, inked a pact to share resources in 2006, three years before a Cairn-led consortium was ready for production. The shares of either side were identified by an independent consultant. Today, both sides claim to have enjoyed the fruits of the partnership through a high extraction ratio. On the other hand, Niko has also been engaged in a decade-long dispute with ONGC over the sharing of resources in the common onshore fields of Bheema and Olpad, respectively.

The DGH invited both sides to a number of technical meetings, and has largely left it to ONGC and Niko to resolve the issue. Niko was quicker to develop Bheema and exploit the resources. ONGC is now complaining about low pressure and reduced production potential from Olpad.

ONGC is now concerned that the Olpad story may be repeated in the Krishna-Godavari basin. Company insiders claim that ONGC shares a small portion of the same gas reservoir that is under utilisation by RIL. But the claim could not be established in the absence of adequate data.

An ONGC exploration team launched a study in mid-2012. But the initiative did not gain momentum as RIL was reluctant to share data until recently. The scenario has now changed for the better as both sides have agreed to share data and examine possibilities, as reported by Business Line on January 6. But it is questionable if there is any easy solution to this dispute. Theoretically, RIL can always wait until ONGC spuds its first production well in 2017.

Source-On Request