The Hindu Business Line : New disclosure norms for oil & gas finds

Companies in the business of exploration and production (E&P) may soon have to tread cautiously before making any announcements about new oil and gas finds by them. A consensus seems to be emerging between the Ministry of Petroleum and Natural Gas, the Directorate General of Hydrocarbons (DGH) and the Law Ministry that instead of empowering the Securities and Exchange Board of India to monitor such announcements, the norms could either be prescribed under the product-sharing contract (PSC) or a Government resolution could be issued for the purpose.

The DGH has been working on the norms that would put in place a system to alert investors and stock exchanges of any premature declaration or disclosure of an oil and gas discovery made by such companies. During the discussions it was felt that empowering SEBI may not help as not all E&P companies are listed, a senior official told Business Line. Many E&P companies come with partners, which are not listed. Thus, it was felt that it should form the part of PSC signed between the Government and the company.

The other option that was being considered was to come out with a Government resolution. The resolution could be similar to one that the Government came out with after dismantling of the administered price mechanism (APM), which clearly stated the procedure to be followed.

Flexibility

A view has emerged that whatever methodology is adopted by the Government should have certain flexibility, the official said, adding that the norms are likely to classify announcement of reserves into various categories. Since these classifications would vary, it would be difficult to have one standard norm, and hence the need to go in for a flexible methodology, he added.

Moreover, the norms are likely to suggest that the discoveries could not be linked to reserves till a competent authority, in this case the DGH, certifies it. Petroleum discoveries are very difficult to estimate as even a promising reserve could turn out to be unrecoverable or too expensive to recover. Accordingly, the finds would be classified as proven, probable and possible, which have significantly different implications for the explorer and the country.

The new guidelines are to direct companies to make declarations of significant discovery only after detailed technical appraisal of the discovery with prior Government nod. The norms are also likely to suggest that the companies could announce the new discoveries with a statement that `commerciality of the find is yet to be proven', he said.

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