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Cairn takes fight with ONGC to KG basin

23 Jun 2011 Evaluate

After the onshore blocks of Rajasthan, the war between Cairn and ONGC has found a new frontier: The deep waters of the Krishna-Godavari (KG) basin. Cairn India, in a letter to the oil regulator, the Directorate General of Hydrocarbons (DGH), and the oil ministry, has accused ONGC of overstating gas reserves in its KG-DWN-98/2 block in the KG basin and submitting development plans without consulting it. Cairn India, a minority partner in the block, had made four discoveries there before selling its 90 per cent stake to ONGC in 2005. Subsequently, ONGC made six significant discoveries and the first ultra-deep water discovery, UD-1, at a record depth of 2,841 meters.
 
The block has been in the news as the company is planning a mega investment to develop it commercially. It could become the second-largest offshore asset in the country after Reliance Industries’ (RIL’s) KG-D6 block. Incidentally, the two are located next to each other. ONGC has estimated in-place reserves of 6.3 trillion cubic feet (tcf) and will shortly file its development programme. It is looking to invest $7.3 billion and is in talks with global deepwater upstream companies such as British Gas and ENI for a tie-up. Cairn also alleged that ONGC did not pay attention to its protests.
 
In response, ONGC has informed that a conceptual development plan has been submitted as part of a proposal for Declaration of Commerciality (DOC) in respect of the northern discovery area of block KG-DWN-98/2. The proposal is under DGH’s consideration. The volumes, expenditures and production profiles quoted are part of the DOC proposal.

Peers
Company Name CMP
ONGC 283.95
Oil India 470.10
Jindal Drilling&Inds 540.15
Deep Industries 476.90
Asian Energy Service 306.05
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