Angry Niko rejects Cairn gas migration claim

Vol 6, PW 16 (09 Oct 02) People & Policy

EXPECT A WORSENING of relations between Niko Resources and Cairn Energy over gas migration between their two blocks in Gujarat.

Cairn wants Shastri Bhawan to act over its claims that gas is migrating from its Gujarat exploration block CB-OS/2 to Niko's Hazira field nearby. On a recommendation from the DGH, Shastri Bhawan wants Niko and Cairn to 'unitise' their blocks.

If this happens, CB-OS/2 and Hazira would be treated as one block for development and profit sharing. Easier said than done! In late September, Niko and its partner Gujarat Petroleum rejected the unitisation proposal and submitted a separate development plan for Hazira.

"Our drilling and offshore locations are far away from the boundary of the Cairn block," reveals a source. "There is no way CB-OS/2 gas is migrating to Hazira." Another Niko-GSPC argument is that there is a vertical north-south fault running along the border between the two blocks that prevents gas migration." Cairn is unconvinced and points to evidence of the "unusual pressure drops" in gas wells in the portions of the CB-OS/2 block adjacent to Hazira.

Says Cairn: "These pressure drops are happening because gas is being drained away to Hazira." Cairn is unwilling to give up easily and is mobilising support from ONGC, itself angry over gas migrating to Niko's NELP-II CB-ONN-2000/2 block from its onland Olpad gasfield. "Some time back ONGC wanted unitisation of Olpad and Nikos CB-ONN-2000/2 but GSPC and Niko scuttled the idea," we learn.

Supporters of unitisation suspect GSPC-Niko's motives. "Development costs become transparent when you unitise a block," adds a source.

"Nobody will be able to play around with these things."

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