Engaging in an open fight with state-owned oil and gas explorer, Cairn Energy India on Wednesday charged Oil and Natural Gas Corporation (ONGC) with overstating oil and gas reserves in its Krishna Godavari (KG) basin block (KG-DWN-98/2) that sits next to Reliance Industries Ltd’s prolific KG-D6 fields.
Cairn currently holds 10% in the block, while ONGC has the balance 90% stake. This is the same block in which Cairn was originally holding a 100% stake and sold 90% to ONGC in 2005.
While ONGC in its development plan for the block — submitted to the Directorate General of Hydrocarbons (DGH)— has stated that the block is commercially viable, Cairn has contested the same, saying: "We believe that the hither to discovered oil and gas resources in the block are only marginal to non-commercial, because of their small size and the potential high development costs due to water depth versus the prevailing gas prices.""Innovative development methods will have to be applied to make these resources commercially viable or else additional resources will have to be established in the block," Cairn said in its May 2 letter to the petroleum ministry and the DGH.
Cairn further said that fundamental to work forward "is to have a correct assessment of the reserve base."
Stating that the oil and gas reserves estimation of the block should be done through an independent agency, Cairn said it is in the interest of all stakeholders to discuss with the DGH and the petroleum ministry and agree on an appropriate way forward.
The works undertaken by Schlumberger Data & Consulting Services in 2007 is flawed and they substantially over-estimate the resources in the block, Cairn said.
"We have pointed out this aspect before on several occasions," Cairn said, while suggesting names of DeGolyer & MacNaughton, in order to establish correct assessment of the resources, based on which the stakeholders would be able to take appropriate decisions.