Oil find claims to be capped

Govt plans to curb hasty announcements.

The government is planning to clamp down on hasty announcements made by oil and gas companies regarding discoveries. The road map for the guidelines, which are likely to be issued by the Securities and Exchange Board of India, is being prepared by the petroleum ministry.

Drawing a lesson from the abnormal movement of Shell's scrip early last year after the company scaled down its estimate global reserves, the ministry is planning to ask companies to benchmark estimates to a classification defined either through a law or through government notification.

The companies may also be asked to inform the government at least seven days before making any announcement on new discoveries. The companies will also be allowed to declare only proved estimates of hydrocarbons in place along with relevant technical details to avoid speculatory announcements and inflated figures.

The Securities and Exchange Commission (SEC) in the US also levies this condition on oil and gas companies. In their filings with the SEC, oil firms have to disclose only proven reserves in terms of either actual production or conclusive formation tests.

But in the Indian context, estimates will be considered proven if the structure, spread, volume and reservoir characteristics are well defined by adequate well control and testing.

Companies explore oil and gas by first drilling a well. Based on the physical properties encountered during the process, the well is "logged". This is followed by a process called casing of the well which involves holding of the well through a tube-like structure.

Officials said a true assessment of the reserves was possible only after the holes in which oil and gas were found were perforated and production test done. The entire process could take a month or even a year depending on the subsurface conditions.

A uniform system of classification of reserves was worked out by the ministry in consultation with the public sector Oil and Natural Gas Corporation and Oil India Ltd besides multinationals like Cairn Energy, Nikko Resources and Gazprom. It was done with a view to have a clear assessment of the quantity of oil and gas available for production in the country.

Besides, the classification will also help to gauge the effectiveness of exploratory and development efforts undertaken in different exploration blocks. It will also give the government a measure of reservoir management by exploration companies by comparing the available reserves with quantities that can be extracted. It could also help in estimating and comparing assets held by different companies.

A cap on the gusher

According to new petroleum ministry guidelines in the works, companies

May be asked to inform the govt at least 7 days before making any announcement on new discoveries

May declare only proven estimates of hydrocarbons in place; no inflated figures

WHAT IS PROVEN

Estimates will be considered proven only after adequate well control and testing

But production tests could take months or even a year, depending on the sub-surface conditions