The Hindu Business Line : Cairn working on apt mode to disclose reserves

The last is yet to be heard on the ongoing war between the Directorate-General of Hydrocarbons (DGH) and Cairn Energy Plc on the announcement of oil and gas reserves made by the Scottish exploration company.

While Cairn Energy on Thursday said that a suitable mechanism is being worked out which would be beneficial for all concerned, indications are that the DGH is likely to issue notice to Cairn seeking clarification.

Cairn has come in for a stick from the DGH on the grounds that it has not been keeping the technical regulator informed about the developments in the fields and its reserves assessments, even while the company has been informing other authorities. Sir Bill Gammell, Chief Executive, Cairn Energy Plc, said, "Reserves issue is very important and has an ability to be misinterpreted."

Speaking to Business Line from New Delhi, Mr V.K. Sibal, Director-General of Hydrocarbons, while expressing concern on such announcements being made by the exploration and production companies, said, "We are seeking legal opinion on whether any action could be taken under the production-sharing contract (PSC) signed between the Government and the company (Cairn)."

Meanwhile, clarifying Cairn's position Sir Bill said that in his meeting with the DGH and other relevant authorities in India the parties have agreed to have a mechanism in place, which would be suitable to both. "We have to look for a practical way forward," he said.

Cairn Energy, with plans to come out with an initial public offering for its Indian business, is looking at an early resolution to all the issues. The DGH has been maintaining that such announcements should be made only after due consultation and clearance from the regulator.

The DGH had pointed out that Cairn was announcing reserves to the London Stock Exchange without informing the Indian Government. Besides, objections were also raised on Cairn not involving the DGH while getting the reserve assessments of the fields done.

Cairn Energy's claims of a substantial increase in the reserve base of its Rajasthan oilfields to an estimated 3.6 billion barrels had come in for severe criticism from the DGH. While the company maintained that an independent assessment by DeGolyer and McNaughton (D&M) estimates 3.4 billion barrels of oil equivalent in Rajasthan, which was close to what the company had estimated.

According to the DGH, Cairn's official approved reserves were lower than the claim.