Gas troubles

Gujarat State Petroleum Corporation (GSPC) is owned by the government of Gujarat, and presumably that is why the announcement that the company had struck a natural gas reservoir of an estimated 20 trillion cubic feet was made by the state's chief minister, Narendra Modi, and not the company's chief executive.

While the news, coming in the wake of a similarly large find by Reliance, of 14 trillion cubic feet, is certainly great news and proof of the success of India's policy of involving the private sector in exploration activities, there is a bit of a problem.

That problem arises from the fact that GSPC's Canadian partner in the field, Geoglobal, is hesitant to put a figure to the find and prefers to wait for some more drilling results.

In sharp contrast, Modi has said the 20 trillion figure is "conservative", indicating that the final reserves may be much larger, and that too, with 85 per cent of these reserves in a position to be "commercialised".

Indeed, as the Directorate General of Hydrocarbons (DGH) has pointed out, the size of the find has not been confirmed by an independent audit, and so he has written to Sebi to formulate norms for how announcements are to be made of such finds for firms that are listed on the stock markets.

Whether the norms for such announcements should come from Sebi or from the DGH is of course an open question, but there can be no doubt that companies cannot be allowed to simply announce their estimates of finds until these are independently verified, and based on a common standard.

In the case of Reliance's find too, its global partner had a different view of what the reserves actually were ""indeed, there are several instances of partners in a field having different estimates of not just the actual potential, but also on the amount that can be extracted without damaging a field.

Given the firestorm set off by Shell's downward revision of its oil reserves last year, such caution is long overdue. Since both the pace of extraction as well as the size of the field have an impact on a company's fortunes, it is obvious the DGH needs to settle, and enforce, these norms quickly.

Gas of course differs from oil when it comes to economic extractability, as gas is only useful when it is piped directly to a user (through a pipeline to an electric utility, say) or through terminal-to-terminal liquefaction and re-gasification.

Needless to say, finds below about 10 trillion cubic feet are generally considered not worth the investment needed to be able to use the gas.

Both the Reliance and the GSPC find (if correct) make the cut, fortunately, though the finds are way below the 500 trillion cubic feet that Russia is believed to have, or the 270 trillion cubic feet of gas reserves estimated for Iran .

While there is some scepticism over the reserves of these two countries as well, there is little doubt that India needs to continue to work on long-term contracts of the sort the petroleum minister has just signed with Iran.