DGH approval must for production beyond oilfield area

New Delhi: The government has prohibited the production of oil and gas from fields that go beyond the contract area unless the operator takes prior approval from the Directorate General of Hydrocarbons (DGH). The move is seen as a pivotal change in rules to prevent situations like the 20-month-long gas migration dispute between Reliance Industries Ltd (RIL) and Oil and Natural Gas Corporation (ONGC) over output from a reservoir RIL shares with the state-owned company. The government has also made amendments in the Model Revenue Sharing Contract (MRSC) of the second round of the Discovered Small Fields Bid.

Government tightens the noose

“A failure of the contractor to notify the Directorate General of Hydrocarbons (DGH) about any extension in the reservoir of the discovery area outside its contract area as required under Article 10.9, shall be considered a non-compliance or contravention of the provisions of this contract,” the amended rule said. The failure to inform DGH could result in the termination of a contract. “The contractor is limited by petroleum that is available in its clearly defined and demarcated development area. “Notwithstanding anything contained in this contract, the contractor shall have no right to carry out petroleum operations with respect to a reservoir extending outside contract area, without seeking the prior explicit written permission of the government,” the amendment further said.

The amendment has also allotted for the joint development of two fields with connected reservoirs. In case a contractor discovers that their reservoir has been extended beyond its field after submitting the field development plan, they would have to inform the DGH within 15 days of receiving this information, the new rules state.

The RIL-ONGC case

The move was prompted by a long-drawn legal battle between RIL and ONGC. Last year, an international arbitration tribunal had absolved Reliance and had held that they had not unjustly enriched themselves by producing the gas that had migrated from the ONGC fields in the KG Basin.