Cairn accuses ONGC of overstating gas reserves in KG-DWN-98/2 block

State-owned Oil and Natural Gas Corp (ONGC)'s estimates of natural gas reserves in its much touted KG basin  KG-DWN-98/2 block, adjacent to Reliance Industries' prolific KG-D6 fields may be grossly overstated.

Cairn India, which had made four discoveries in the KG-DWN-98/2 block before selling 90 per cent out of its 100 per cent stake in the block to ONGC in 2005, has written to the oil regulator DGH of the state-owned firm's gross overstatement of the reserves in the block, according to sources.

The firm believes that the discovered oil and gas reserves were only marginal to non-commercial, due to their small size and potential high costs of development due to water depth versus the prevailing prices.
According to ONGC estimates, the blocks hold in-place volume of 25.61MMT of oil and 197 billion cubic metres of natural gas. The company has proposed to develop the same at an investment of over $7.3 billion to produce up to 30 MMSCMD of gas.

According to industry sources, Cairn's warning assumes added significance in the light of the fact that that it holds a 10 per cent interest in the acreage and had struck oil in an area in Rajasthan where global giant Royal Dutch / Shell exited saying there were no hydrocarbons.

In 2007 Reliance had estimated that the Dhirubhai-1 and 3 fields in the KG-D6 block would yield 69MMSCMD of output, but production is down to 40 MMSCMD due to reservoir complexities, the Mukesh Ambani-led firm says.

Cairn, with its acknowledged expertise in assessment of hydrocarbon resources, wants "a correct reserve estimation of the block through an independent agency."