RIL will have to pay for gas migrated from ONGC block: Pradhan

The government will seek compensation from the Mukesh Ambani-promoted Reliance Industries Ltd (RIL) for producing natural gas that migrated from an adjoining block of Oil and Natural Gas Corporation, Petroleum Minister Dharmendra Pradhan said today.

Besides, the petroleum ministry will conduct an internal inquiry into any lapses by the state-owned ONGC, Pradhan said. 

He said his ministry had accepted the proposal by a committee headed by A P Shah that had recommended that compensation be sought from RIL for the ''unjust benefit'' it received through migration of gas from ONGC's block in the Krishna-Godavari basin to RIL fields.

''We have accepted the Shah Commission's recommendations entirely. However, the compensation needs to be quantified. The Directorate General of Hydrocarbons (DGH) will be asked to calculate the amount. It will calculate the amount within one month and we will come out with a notice after that,'' said Pradhan. The DGH is the technical arm of the oil ministry.

 The one-man panel's report had agreed to the findings of a report submitted by DeGolyer and MacNaughton in November 2015, which stated that out of the 58.68 bcm of gas produced from the KG-D6 block since 1 April, 2009, 8.98 bcm could have migrated from ONGC's fields.

According to industry experts, this will work out to about Rs11,000 crore in terms of value, based on a gas price of $4.2 per million metric British thermal unit.

 The panel had also recommended further inquiry into whether ONGC and RIL had prior knowledge about the migration. ''The inquiry will be conducted by the government,'' Pradhan clarified.  ''The fact has been established. There has been migration. There is some protocol on how to look into the issue,'' he added.

The Shah panel, set up on 15 December 2015, had submitted its report on 31 August. RIL's D1 and D3 fields had estimated reserves of 80.70 bcm, while ONGC's Godavari-PML had 14.21 bcm of reserves and KG-D5 another 11.86 bcm.

The panel had stated that long periods of alleged inactivity on the part of ONGC must be examined further. When asked about this, ONGC chairman D K Sarraf refused to comment.

In 2013, ONGC alleged RIL intentionally drilled wells close to its blocks through which the gas had migrated. Following this, D&M was appointed by both RIL and ONGC to study the issue.

According to D&M's report, the reservoirs in ONGC's KG-DWN-98/2 (KG-D5) and the Godavari-PML are connected with the Dhirubhai 1 and 3 (D1 & D3) fields located in the KG-DWN-98/3 (KG-D6) block of RIL.

Pradhan added the government would take steps to strengthen DGH, as recommended by the panel. Shah had asked the ministry and the DGH to review and strengthen the disclosure system by imposing penalties for deliberate suppression of material information.