Indian govt reserves right to call for joint development of oil and gas blocks under OALP

KOLKATA (miningweekly.com) – The Indian government has reserved the right to call for the joint development of oil and gas fields to be auctioned under the newly unveiled Open Acreage Licensing Policy (OALP).

In a draft contractor agreement, which is signed between a successful bidder and government, a provision for the joint development of reservoirs has been incorporated to prevent disputes between contractors if the respective blocks concerned have been awarded to two different developers.

Last month, the government unveiled the OALP, which will allow investors to carve out areas where they would want to drill for oil and natural gas.

An auction will be held at least twice a year for the allocation of carved out blocks instead of investors having to wait for the government to announce an auction schedule.

The first auction under the OALP is scheduled for July and successful bidders at the auction will enjoy pricing and production freedom under a revenue sharing model with the government.

The draft contract stipulates that “in the case the contractor determines that the reservoir in its contracted block is extending to a contracted block of another developer and the blocks are contiguous, the contractor will need to submit an application for joint development of the reservoir to the government”.

The contractor for a contiguous block will have to share all relevant geological details with the contractor of the neighbouring block and with the government.

The government will then direct both contractors at contiguous reservoirs to carry out a hydrocarbon balancing study and to submit a proposal for the joint development of the area.

However, to avoid the possibility of a dispute between two adjacent contractors, the government has reserved the right under OALP to undertake a joint development plan on its own, using an independent agency. Contractors will be obliged to implement such a development plan, once approved by the government.

The provision aims to avoid protracted legal battles, such as the one between government exploration  and production major ONGC and private Reliance Industries, wherein it has been disputed that an estimated 11-billion cubic metres of gas had ‘migrated’ from  ONGC’s Godavari and KG-DWN blocks to Reliance Industries’ adjacent KG-D6 block.