 "A technician works inside the ONGC group gathering station on the outskirts of Ahmedabad. Photo: Reuters")
Trouble is brewing for government-owned Oil & Natural Gas Corporation (ONGC) because it failed to make disclosures to stock exchanges on the gas migration dispute with Reliance Industries Ltd (RIL). ONGC kept its small shareholders in the dark, violating listing norms, corporate lawyers and minority shareholders groups said.
“In any other country ONGC’s shareholders would have sued it for failing to inform minority shareholders as soon as it came to know about the gas migration,” said Shriram Subramanian, founder and CEO of Ingovern, a Bengaluru-based shareholder advisory company that plans to raise the issue with regulators.
“ONGC should have informed the stock exchanges as it is an important material development and shareholders have the right to exit or stay invested in the company based on the crucial information,” he said.
The government owns a 69 per cent stake in ONGC and the rest is owned by minority shareholders. The company is holding its shareholders’ meeting on Thursday in New Delhi.
In a report submitted last Friday, former High Court Justice AP Shah agreed with the findings of an earlier report by consultant D&M that said of the 58.68 bcm of gas produced from RIL’s KG-D6 block since April 1, 2009, 8.98 bcm could have migrated from ONGC’s fields.
Besides, it said it was the government and not ONGC that had a right over any penalty imposed on RIL. ONGC had no locus standi to bring a “claim against RIL for trespass since it does not have any ownership rights or possessory interest in the natural gas”, the Shah panel maintained.
ONGC did not respond to email queries on this issue sent last week. An executive, however, said the company had kept the government informed about the gas migration. “As a commercial organisation, we have scores of disputes. We do not inform the stock exchange about all of them,” he said.
The first time ONGC officially admitted to a dispute was in May 2014, days before the National Democratic Alliance came to power. ONGC took RIL, the Union government and the director general of hydrocarbons to court on the issue.
In its petition in the Delhi High Court, ONGC alleged that RIL withdrew gas worth thousands of crores of rupees from its Krishna-Godavari fields off the Andhra Pradesh coast that were adjacent to RIL’s KG-D6. The suit said ONGC’s board of directors was informed of the gas migration in March 2014.
The Shah report pointed out RIL had knowledge about the possible migration in 2003 and ONGC, too, had a prior understanding about the continuity in 2007, but took up the matter only after six years. The panel recommended a further inquiry into the subject of prior knowledge about migration by both parties.
Corporate lawyers said the market regulator was taking a very strong view of companies not informing stock exchanges and minority shareholders on material developments.
“The Securities and Exchange Board of India has strict disclosure obligations and all material disputes, including litigation, have to be disclosed to the stock exchanges by listed entities within 24 hours of the event,” said RS Loona, managing partner of DV Alliance.
A lawyer said media company NDTV was penalised Rs 2 crore by the Sebi for informing the bourses about a tax dispute a few months late. NDTV has appealed against the Sebi penalty.
Stock exchanges can also initiate action against erring companies. When contacted, the Bombay Stock Exchange spokesperson declined to comment on the ONGC matter. The National Stock Exchange spokesperson did not respond to an email query.
The Shah report, quoting the Directorate General of Hydrocarbons (DGH), said ONGC acquired and processed its own data in 2006-07 for the Godavari block overlapping Reliance's KG-DWN 98/3 block and conducted a third-party study for the appraisal plan for the block, which it submitted to the DGH in October 2007, and which indicated the continuity of Pliocene channels from ONGC’s block to RIL’s block.
“However, ONGC never raised any allegation regarding the possible continuity of Pliocene reservoirs for a period of more than six years, ie from at least 2007 to 2013. Ideally, according to the DGH, ONGC should have carried out pressure tests in its blocks once RIL commenced commercial production in April 2009 to confirm the suspected connectivity,” the report said.
Instead, the DGH alleges ONGC neither acted in time nor took any steps to carry out a prompt analysis of the data available with it.
When the Shah committee asked ONGC about this lapse, the company did not reply. The Shah panel did not put a figure to the final value of the migrated gas produced by RIL during the term of its lease. “While the D&M report has to form the basis for the migration of gas up till 2015, subsequent migration of gas has to be inquired into by the government,” it said.
“In any other country ONGC’s shareholders would have sued it for failing to inform minority shareholders as soon as it came to know about the gas migration,” said Shriram Subramanian, founder and CEO of Ingovern, a Bengaluru-based shareholder advisory company that plans to raise the issue with regulators.
“ONGC should have informed the stock exchanges as it is an important material development and shareholders have the right to exit or stay invested in the company based on the crucial information,” he said.
The government owns a 69 per cent stake in ONGC and the rest is owned by minority shareholders. The company is holding its shareholders’ meeting on Thursday in New Delhi.
In a report submitted last Friday, former High Court Justice AP Shah agreed with the findings of an earlier report by consultant D&M that said of the 58.68 bcm of gas produced from RIL’s KG-D6 block since April 1, 2009, 8.98 bcm could have migrated from ONGC’s fields.
Besides, it said it was the government and not ONGC that had a right over any penalty imposed on RIL. ONGC had no locus standi to bring a “claim against RIL for trespass since it does not have any ownership rights or possessory interest in the natural gas”, the Shah panel maintained.
ONGC did not respond to email queries on this issue sent last week. An executive, however, said the company had kept the government informed about the gas migration. “As a commercial organisation, we have scores of disputes. We do not inform the stock exchange about all of them,” he said.
The first time ONGC officially admitted to a dispute was in May 2014, days before the National Democratic Alliance came to power. ONGC took RIL, the Union government and the director general of hydrocarbons to court on the issue.
In its petition in the Delhi High Court, ONGC alleged that RIL withdrew gas worth thousands of crores of rupees from its Krishna-Godavari fields off the Andhra Pradesh coast that were adjacent to RIL’s KG-D6. The suit said ONGC’s board of directors was informed of the gas migration in March 2014.
The Shah report pointed out RIL had knowledge about the possible migration in 2003 and ONGC, too, had a prior understanding about the continuity in 2007, but took up the matter only after six years. The panel recommended a further inquiry into the subject of prior knowledge about migration by both parties.
Corporate lawyers said the market regulator was taking a very strong view of companies not informing stock exchanges and minority shareholders on material developments.
“The Securities and Exchange Board of India has strict disclosure obligations and all material disputes, including litigation, have to be disclosed to the stock exchanges by listed entities within 24 hours of the event,” said RS Loona, managing partner of DV Alliance.
A lawyer said media company NDTV was penalised Rs 2 crore by the Sebi for informing the bourses about a tax dispute a few months late. NDTV has appealed against the Sebi penalty.
Stock exchanges can also initiate action against erring companies. When contacted, the Bombay Stock Exchange spokesperson declined to comment on the ONGC matter. The National Stock Exchange spokesperson did not respond to an email query.
The Shah report, quoting the Directorate General of Hydrocarbons (DGH), said ONGC acquired and processed its own data in 2006-07 for the Godavari block overlapping Reliance's KG-DWN 98/3 block and conducted a third-party study for the appraisal plan for the block, which it submitted to the DGH in October 2007, and which indicated the continuity of Pliocene channels from ONGC’s block to RIL’s block.
“However, ONGC never raised any allegation regarding the possible continuity of Pliocene reservoirs for a period of more than six years, ie from at least 2007 to 2013. Ideally, according to the DGH, ONGC should have carried out pressure tests in its blocks once RIL commenced commercial production in April 2009 to confirm the suspected connectivity,” the report said.
Instead, the DGH alleges ONGC neither acted in time nor took any steps to carry out a prompt analysis of the data available with it.
When the Shah committee asked ONGC about this lapse, the company did not reply. The Shah panel did not put a figure to the final value of the migrated gas produced by RIL during the term of its lease. “While the D&M report has to form the basis for the migration of gas up till 2015, subsequent migration of gas has to be inquired into by the government,” it said.
RIL’s D1 and D3 fields had estimated reserves of 80.697 bcm, while ONGC’s Godavari-PML had 14.21 bcm of reserves and KG-D5 another 11.86 bcm.
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Advisory firms say: ONGC failed to make proper disclosures to stock exchanges on gas migration dispute with RIL 69 per cent stake The government owns in ONGC, while the rest is owned by minority shareholders Shareholders’ meeting Company is holding on Thursday in New Delhi Consultant D&M said: Out of 58.68 bcm of gas produced from RIL's KG-D6 block since April 1, 2009, 8.98 bcm could have migrated from ONGC’s fields Report also said: Govt, not ONGC, has right over any penalty imposed on RIL |
