Niko & ONGC in Dispute Production Start at Bheema Field

Niko Resources might have to wait a while longer before it can start producing gas from its Bheema gasfield in Gujarat. Niko's development plan for Bheema (which sits ring fenced within its NELP-II 'Surat' block CB-ONN-2002/2 onshore Gujarat) is gathering dust in the ministry because of serious differences over a proposed gas balancing agreement with ONGC and its neighboring Olpad gasfield.

At issue is the date on which the gas balancing agreement should begin. ONGC wants it to begin from July 18, 2001 when the PSC for CB-ONN-2002/2 PSC was signed. Niko wants it to begin later, from November 2002 when it declared the Bheema gas discovery commercial.

Luckily for Niko it has oil ministry support because the November date was earlier approved by ONGC. Thankfully, ONGC and Niko have reached agreement on other crucial issues of the gas balancing agreement. For instance the GBA term sheet says that the Olpad-Bheema reservoir will be exploited in six years on the basis of 'initial gas in place' and a recovery factor determined by reserves consultant DeGolyer & MacNaughton, jointly appointed by ONGC and Niko.

DeGolyer's recommendations submitted in July permit each side to produce 25% of the reserves from their side for the first two years, followed by 20% for the third year; 15% for the fourth year, 10% for the fifth year and 5% for the sixth year.

DeGolyer estimates 15bn cubic feet total gas reserves at Olpad (ONGC) and 2.7bn cubic feet total gas reserves at Bheema (Niko).

ONGC also wants the 'minimum gas cut off rate' of 0.0353m cf/d to be used. And, ONGC wants the recovery factor to be estimated at the (earlier) figure of 64% and not between 80% and 85% to calculate proved, possible and probable categories of reserves. ONGC also does not want the 'possible' category of 'ultimate' gas to be considered for gas balancing.

ONGC discovered Olpad in 1962. It drilled eighteen exploratory wells to delineate the field and established four 'free-gas' bearing horizons. ONGC has been producing gas from Olpad-2 and Olpad-4 since 1982. Niko's NELP-II block CB-ONN-2002/2 measures 419-sq km. When Niko submitted a development plan for Bheema gasfield, ONGC demanded tests to determine connectivity with Olpad. Joint pulse tests confirmed that Olpad-2 and Bheema-1 were connected. Both sides then agreed to hire D&M to estimate reserves and produce a joint production profile of Olpad and Bheema fields. D&M submitted its final report in July.

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