Oil's not well in TN: Protests against exploration put ONGC in a spot

Topics ONGC | Tamil Nadu | hydrocarbon

According to ONGC, at a conservative crude price of $55 a barrel, remaining recoverable reserves worth around $4.9 billion of crude oil and $3.6 billion of gas are stuck in the Tamil Nadu region
In the 2014 Tamil movie Kaththi, actor Vijay gives a long speech on how multinationals are trying to exploit farmers for their land. He also talks about hydrocarbon (methane) exploration in the state, besides hinting at groundwater depletion due to industrialisation. Reserving the 2G scam for the punchline, he says, “Cell phone is a luxury but water is a necessity.”

When asked about state-run Oil and Natural Gas Corporation’s (ONGC’s) exploration activities in the state, KV Elangeeran, president of the Cauvery Delta Farmers’ Federation, echoed the reel hero. “Water is a necessity,” he said. “Exploration should be done in on-land areas only, in dry lands like those in Gujarat and Rajasthan. For Tamil Nadu’s rice bowl, like the Cauvery Delta region, this is like looting our groundwater resources.” The Cauvery Delta Farmers’ Federation is a non-governmental organisation that works for the upliftment of farmers in the region.

Since 2010, Tamil Nadu has witnessed passionate protests against oil and gas exploration, with the first one being against the coalbed methane project by the Great Eastern Energy Corporation (GEECL) at Mannargudi in Tiruvarur district. Besides ONGC and GEECL, other players, too, have faced similar resistance in the state. So much so that Bengaluru-based GEM Laboratories, which was awarded the Neduvasal block during the first round of the discovered small field (DSF) bidding, asked the Directorate General of Hydrocarbons (DGH) to be allocated a new hydrocarbon field instead of the asset in Tamil Nadu following widespread protests against the project.

Cauvery conundrum

1,964 MMtoe: Potential reserves in Cauvery basin, of which 80% is yet to be discovered
$8.5 billion: Value of total hydrocarbon reserves in the Tamil Nadu region
$4.9 billion: Value of available crude oil
$3.6 billion: Value of available gas
$1,766 million: Loss to state exchequer if no new exploration activity happens
In June this year, Chief Minister M K Stalin said that no new hydrocarbon project will be allowed in the Cauvery basin to protect its agro-ecology and the livelihood of farmers. Stalin’s statement came immediately after the Tamil Nadu State Environment Impact Assessment Authority (SEIAA) rejected ONGC’s application to drill and explore 10 oil wells in Ariyalur and five in Cuddalore districts.

Ahead of the state elections in August 2020, the AIADMK government, too, had declared the Cauvery delta re­gion — comprising Than­javur, Tiruvarur, Trichy, Ari­yalur, Na­gapattinam, Pudu­kk­ottai, Cud­dalore and Karur — as a “protected agricultural zone” and disallowed new ex­ploration activities under the Ta­mil Nadu Protected Agricu­l­tural Zone Development Act, 2020.

This puts both the government and the opposition parties on the same page regarding oil and gas exploration in the state.

What’s at stake

Of the 26 sedimentary basins in India, only nine are being currently explored. Of these nine, Cauvery is the only one that does not have any onshore seismic survey activity at present because of the state government’s stand and because 85 per cent of its on-land acreage falls in the protected zone. DGH estimates that the Cauvery basin has potential reserves of 1,964 million metric tonnes of oil equivalent (MMtoe). Of this, more than 80 per cent is yet to be discovered.

According to ONGC, at a conservative crude price of $55 a barrel, remaining recoverable reserves worth around $4.9 billion of crude oil and $3.6 billion of gas are stuck in the Tamil Nadu region. From this, the state government could be getting a royalty of about $1,766 million, said an ONGC official. The Indian Basket Crude price was seen at $71.88 a barrel on July 22, which means the value of recoverable reserves will now be much higher.

“For a country that meets 85 per cent of its crude oil needs through imports, recoverable itself will be a huge saving on import bill,” said an ONGC official, adding, “If you count the 82 per cent of the undiscovered area as well, it will be a huge boost for the country.”

According to ONGC, the company is currently working on only 350 wells in the region, which is 5.34 sq km or 0.1 per cent of the total acreage allotted to it. So far, it has made an investment of Rs 15,500 crore in the region, paying a combined royalty and value-added tax of Rs 5,051 crore to the state exchequer. The contribution to the state exchequer was Rs 243 crore in 2020-21 due to lower crude prices during the year, compared to Rs 366 crore a year before.

What protesters say

One major concern of the protesters is the uniform licensing policy (ULP) passed by the Narendra Modi government. “With ULP in place, companies will get the right to explore even unconventional hydrocarbons like shale in the same block,” said T Jaya­raman, coordinator of the Anti-Methane Project Movement, who is spearheading the protests in the Delta region. “For that, they will use techniques like hydrofracking (the fracturing of bedrock formations by a pressurised liquid), which means there will be serious groundwater-related issues for the region,” he added.

Jayaraman claimed that traces of crude oil were found in drinking water near existing exploration regions in areas like Periyakoilkuppam in Cuddalore district and the number of people affected with cancer were rising, with cases touching up to 16 per cent of the population in some villages.

ONGC counters Jayaraman’s allegations citing reports by district administrations that say there is no change in the groundwater level in the region. The company also says there are no plans of getting into unconventional hydrocarbons.

However, on July 1 this year, there were reports of oil leakage to farmland from an ONGC pipeline at Panaiyur village in Thiruvarur district. “There were repeated such instances in Tamil Nadu, which damaged our fields, but the company is of the view that this is normal in oil and gas operations,” Jayaraman said.

ONGC’s entire crude produced from the region is supplied to the Chennai Petroleum Corporation (CPCL) refinery, while the gas is supplied for the 750-mega-watt of electricity produced in the state by companies like Tamil Nadu Generation and Distribution Corporation (TANGEDCO), Lanco, OPG Power, Arkay Energy, Pioneer Power and Coromandel Electric Company, among others. Stopping new exploration activities means that these companies will also have to depend more on imports for crude oil and natural gas in the years to come. As of today, however, a solution doesn’t appear in sight.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel