Hazira reserves controversy sparks debate

Vol 4, PW 17 (27 Sep 00) Exploration & Production

How do you sabotage an impending bond issue Release a report suggesting the value of your principle asset is less than a quarter of what you claim it is.

That's a dilemma faced by Gujarat State Petroleum fears, following a report in the 21st September issue of the Economic Times that reserves at its Hazira gasfield are 3.8bn cubic metres, not 16.8bn. According to the article, the lower figure stems from a report prepared by ONGC's Institute of Reservoir Studies in a study dated 22nd August this year, and counters a far higher estimate given in a report prepared by Chapman Petroleum Engineering of Calgary in July 1996.

Financial institutions, which have lent money based on the Chapman study, will undoubtedly be worried. But how reliable is the ONGC report Contacted by Petrowatch, a source at the Institute of Reservoir Studies refused to comment.

Gujarat Petroleum questions the timing of the article. A senior official blames vested interests that want to abort the company's plan to raise Rs250cr ($55m) from financial institutions to fund construction of a 160-MW combined cycle power plant, fired by gas from Hazira.

To counter negative publicity, Gujarat Petroleum has released details of a third report, prepared by DeGoyler & MacNaughton on 31st December 1998, in which the US company projects total reserves of 14.7bn cubic metres: 3.57bn (proven); 2.35bn (probable); and 8.84bn (possible). It's anyone's guess which report is the most credible.