Alaya Legal presents its eleventh issue of the Oil and Gas: Ezine to its Readers. Web-links are provided for ready access to certain reference material. The contents are presented with a view to allow comprehensive update in a systematic manner, from the legal perspective.

Reference Material

  • Categories of proven reserves of oil and natural gas across the globe may be accessed at,
  • Explanation with respect to broad categorisation in the Oil and Natural Gas Industry may be accessed at,,%20Midstream%20and%20Downstream.html

OneSubsea has announced successful commission of Subsea Boosting Systems in the Gulf of Mexico
April 04, 2016
OneSubsea, a Schlumberger company has come up with a subsea boosting systems installed in ultra deep waters, located in the Gulf of Mexico. This system helps in cost effective recovery from the reservoirs. It has been installed at a depth of 7000 ft. and consists of 3 retrievable single phase pumps of 3.0 MW each.

Lula Alto oilfield put into production
April 12, 2016
Lula Alto pre-salt oilfield of Sinopec Corporation Brazil’s PB project was put into production. The Lula Alto oilfield is situated in the middle part of Lula oilfield in the BM-S-11 block of Santos Basin and it produces 30,000 barrels per day of crude oil and 1 million cubic meters of natural gas per day.

Production started at Julia Oil Field in the Gulf of Mexico by ExxonMobil
April 19, 2016
According to Exxon Mobil Corporation oil production has started at the Julia oil field in the Gulf of Mexico. The first production well is now operative and a second well will start production in the coming weeks.

The Julia field was discovered in 2007 and it comprises five leases in the ultra-deep water Walker Ridge area of the Gulf of Mexico. ExxonMobil, the operator, and Statoil Gulf of Mexico LLC each hold a 50 percent interest in the Julia unit.

ExxonMobil has started production at Point Thomson
April 22, 2016
ExxonMobil’s first company-operated project in Alaska’s North Slope- Point Thompson project started with production operations. Central pad facilities are designed to initially produce about 5,000 barrels per day of condensate and 100 million standard cubic feet per day of recycled gas. The recycled gas is re-injected for future recovery. At its maximum rate of production, the facility is designed to produce up to 10,000 barrels per day of natural gas condensate and 200 million cubic feet of recycled gas.

Schlumberger to acquire Coiled Tubing Drilling Units from Xtreme Drilling and Coil Services Corporation
April 27, 2016
Schlumberger has entered into an agreement with Xtreme Drilling and Coil Services Corporation for the acquisition of coiled tubing drilling and coiled tubing units. Xtreme currently owns a fleet of 11 coiled tubing units located in Saudi Arabia and the United States. The transaction is subject to customary closing conditions.

ONGC has executed under balance drilling for the first time in India
May 12, 2016
For the first time in India, ONGC has successfully executed Under Balance Drilling (UBD). The UBD project has been put into effect at the Heera and Mumbai High fields.  The UBD facilities are highly efficient as they result in zero damage to formation and real time monitoring of reservoir behaviour which results in improved decision making.

British Petroleum (BP) has started up major project at its largest Gulf of Mexico platform
May 25, 2016
In order to increase the production life of the Gulf of Mexico, BP has started up a major water injection project at its Thunder Horse platform.  This latest addition will boost recovery of oil and natural gas from one of the Thunder Horse field’s three main reservoirs.

From those wells, water will be injected into the reservoir to increase pressure and enhance production. The improvements are expected to allow the Thunder Horse facility to recover an additional 65 million barrels of oil equivalent over time.

Sinopec’s Diesel Hydrogenation Technology won bidding of Brunei project
May 24, 2016
Sinopec’s continuous liquid phase diesel hydrogenation technology which has independent intellectual property rights won the bidding of a PMB project of Hengyi Industries Sdn Bhd in Pulau Muara Besar, Brunei. The production of the PMB project with a 2.2 million tonnes/year diesel hydrogenation unit is planned to be put in course by 2018.

The diesel hydrogenation technology developed by Sinopec is a unique combination of a process with dedicated catalyst, having the advantages of low energy consumption and investment, good effect, and long-period stable operation.

Reliance entered into agreements for the sale of its interest in Gulf Africa Petroleum Corporation to Total
May 31, 2016
Reliance Exploration & Production DMCC (REPDMCC), which is a subsidiary of Reliance Industries Limited (RIL) and Total, has executed agreements on May 30, 2016 for the sale of the interest held by REPDMCC in the Mauritius- incorporated Gulf Africa Petroleum Corporation (GAPCO). GAPCO is a holding company with several operating subsidiaries in Tanzania, Kenya and Uganda which primarily deal with import of petroleum products and trading, storage, distribution, marketing, supply and transportation of oil products in East Africa. REPDMCC had also acquired 76% equity interest in GAPCO in 2007.

GAIL has started drilling another well for exploration
May 31, 2016
GAIL India has started drilling its second exploratory well in Nabhoi village of Anand District in Gujarat. It plans to complete drilling up to 2200 metres deep within a period of 35 days from the commencement date. The well is situated in the IX Block of the Cambay Basin.

ONGC Videsh signed MOU with SOCAR Trading
June 01, 2016
ONGC Videsh Limited and SOCAR Trading SA signed a MoU on May 27, 2016 at Geneva. The Objective of the MoU is to explore possibilities of Joint Marketing of ONGC Videsh’s crude oil portfolio by leveraging SOCAR Trading’s experience in oil trading.  Initially, both parties agreed to initiate discussion on Joint Marketing Agreement in respect of ONGC Videsh’s equity crude from ACG, Azerbaijan and based on the performance of this agreement both parties will mutually agree to optimise price realisation of other crudes from ONGC Videsh’s portfolio either through Joint Marketing or Joint Venture route.

Oil India Limited, along with IOCL and BPRL signed definitive agreement to acquire up to 23.9% shares from Rosneft Oil Company in JSC Vankorneft
June 17, 2016
Indian Consortium, led by Oil India Limited (OIL), along with, Indian Oil Corporation Limited (IOCL) and Bharat PetroResources Limited (BPRL), a 100% subsidiary of Bharat Petroleum Corporation Limited (BPCL), signed definitive agreement to acquire up to 23.9% shares from Rosneft Oil Company (Rosneft), NOC of Russia in JSC Vankorneft, a company organised under the law of Russian Federation which is the owner of Vankor and North Vankor Field licenses. The acquisition is subject to relevant Board, Government and regulatory approvals and is expected to close by September 2016.

GAIL has placed order for 341 km of Line Pipes for Phulpur-Haldia/ Dhamra Pipeline
June 22, 2016
GAIL (India) Limited has placed orders for purchase of 341 km of Line Pipes for the Phulpur – Haldia/Dhamra Natural Gas Pipeline on four companies at a total cost of INR 550 crore. The Pipeline will serve as the Energy Highway (Urja Ganga) of Eastern India. The Line Pipes for which the orders have been placed will be used in the Phulpur (Uttar Pradesh) – Dobhi (Bihar) section of the Pipeline and will be procured from Jindal Saw Limited, MAN Industries (India) Limited, Essar Steel India Limited and Zhongyou BSS (Qinhuangdao) Petropipe Co. Ltd, China. The 1,681 km Phulpur ¬ Haldia/Dhamra Pipeline will be completed in three phases at a cost of INR 12,000 crore and cover eastern Uttar Pradesh, Bihar, Jharkhand, Orissa and West Bengal.

Chevron approved next major Tengiz expansion project in Kazakhstan
July 05, 2016
Chevron Corporation announced that its 50 percent owned affiliate, Tengizchevroil (TCO), will proceed with the development of its Future Growth and Wellhead Pressure Management Project (FGP-WPMP), which will increase crude oil production at the Tengiz oil field in Kazakhstan by about 260,000 barrels per day.

Chevron and JOVO signed LNG Agreement
July 20, 2016
Chevron Corporation announced that its wholly-owned subsidiary, Chevron U.S.A. Inc., has signed a Key Terms Agreement with Singapore Carbon Hydrogen Energy Pte. Ltd., a subsidiary of JOVO, for the delivery of liquefied natural gas (LNG) from Chevron’s global supply portfolio. When the LNG Sale and Purchase Agreement is finalized, JOVO is expected to receive up to 0.5 million metric tons per annum of LNG over five years, with the first delivery expected to arrive in 2018.

Government of India launches Pradhan Mantri Ujjwala Yojana
May 06, 2016
The Pradhan Mantri Ujjwala Yojana was launched by the Government of India on May 01, 2016 at Ballia, Uttar Pradesh. The said scheme aims to provide cooking gas connections to five crore below-poverty-line beneficiaries over the next three years (i.e., 2016-2019).

Central Government of India has exempted excise duty on crude oil production from the prescribed fields under the production sharing contracts
June 13, 2016
Central Government has exempted the duty of excise on crude oil production from the fields (namely Panna & Mukta fields, Ravva Field, Kharsang field, Mid & South Tapti fields, Hazira field, Bhandut field, Sabarmati field, Cambay field, Indrora field, Bakrol field, Lohar field, Dholka field, Wavel field, Baola field, Asjol field, PY-l field, North Balol field, Allora field and Unawa field) under the Production Sharing Contracts to the extent of difference between the ad-valorem rate computed in accordance with the notification 1259(E) dated March 28, 2016 and Rupees Nine Hundred per metric tonne stipulated in the production sharing contracts.

Off-Specification Gas under Gas Sales Agreement (GSA)
Off-Specification gas refers to gas delivered by the Seller to the Buyer at the delivery point which does not conform to the gas parameters/specifications as agreed between the Seller and Buyer under the GSA and/or as required under the applicable law. Factors attributable to off-specification gas could be presence of non-contributing elements such as carbon dioxide or nitrogen. Such non-contributing element may contaminate commercial gas streams and product in transportation infrastructure including pipelines as it reduces the energy value of methane gas of the pipeline product so low that it may not be efficiently burned in internal combustion engines.
Specification and quality of gas to be delivered under GSA is a subject of negotiation between the Buyer and Seller and the same should be detailed clearly and minutely in the technical program/agenda to the GSA. Parties, especially Buyer should know that in addition to potentially triggering injury to the transportation infrastructure, pipeline, gas reception, onward transmission or consumption facilities, off-specification gas may not be fit for use by the ultimate user.
A quality specification clause under GSA mainly considers quantity of methane present in gas, calorific value of the gas with a minimum and a maximum permissible level, maximum permissible levels for impurities (mainly carbon dioxide, sulphur, nitrogen, oxygen and water), minimum and maximum delivery temperature for the gas, Wobbe Index[1], ratio of the average molecular weight of gas to that of air (relative density) and presence of objectionable materials in gas.
In a GSA, while agreeing on specifications, the Seller may require and emphasize on a widely drawn quality specification in order to maximise the deliverable quantities of gas for which it receives the full purchase price and to minimise the frequency of off-specification events. On the other side, the Buyer may prefer to narrow down the specifications to fit the requirements of the end user and which is also commercially viable and beneficial to it.
Precise measurement of the quality specifications is a significant factor under GSA as price is associated with delivery of gas of a particular quality specification.
In case delivered gas fails to meet the agreed quality specifications, the cures available to the parties may depend on (a) the extent to which the delivered gas does not match the quality specifications; (b) whether the Buyer is able to reasonably and suitably treat such delivered gas; and (c) the point at which the Buyer is made aware or becomes aware of the fact that the delivered gas does not conform to agreed quality specifications.
In a situation where the Seller knows that gas is off-specification before it has been delivered to the Buyer at the delivery point, the Seller is obliged to notify the Buyer of the extent to which the delivered gas is off-specification on an immediate basis. GSA generally requires the Seller to take all reasonable steps to remedy the off-specification gas issues. GSA also imposes an obligation on the Buyer to use prudent and reasonable efforts to attempt to take delivery of the off-specification gas, subject to reimbursement of costs and expenses, however the ultimate judgment as to whether to accept or reject such off-specification gas generally lies with the Buyer.
In case Buyer accepts delivery of the off-specification gas which has been notified to it in advance by the Seller, GSA grants the Buyer a price discount and/or an indemnity provision against damage/loss caused by such off-specification gas. The remedy available to the Seller is inclusion of a cap on its liability to indemnify the Buyer. Seller may argue that in a situation where the Buyer willingly and knowingly takes delivery of off-specification gas that this constitutes a valid delivery of gas and the off-specification gas must be paid for in the normal course of events, without any concession in favour of the Buyer.
In case neither party was aware that the gas delivered was off-specification at the delivery point, the Buyer may try to ensure that the Seller is obliged to indemnify it with respect to (a) any damages, costs or losses related to treating and/or disposing of the off-specification gas; (b) the costs and expenses of cleaning up the Buyer’s facilities and also any end user or third-party facilities for which the Buyer is liable; and/or (c) any death or injuries or other third-party claims for which the Buyer is liable[2].
The Seller may try to limit its exposure to such claims by negotiating a cap on potential damages and losses. The GSA may provide that the remedy for shortfall in respect of the delivery of gas may be deemed to apply to the delivery of off-specification gas.
In nutshell, under a GSA, it is always the Seller’s obligations to take remedial steps to meet the off-specifications gas issues. The Seller owes a duty of care to the Buyer and to act to the standard of a reasonable and prudent operator. It is good industry practice to prescribe an objective standard in relation to the duty of care owed by the Seller in the event of off-specifications gas under the GSA.


[1] It is an expression of the calorific value of a gas flame at the point of combustion.

[2] Peter Roberts, Gas Sales and Gas Transportation Agreements Principles and Practice, Sweet & Maxwell, 2004


Reference Material

  •  Categories of proven reserves of oil and natural gas across the globe may be accessed at,
  • Explanation with respect to broad categorisation in the Oil and Natural Gas Industry may be accessed at,,%20Midstream%20and%20Downstream.html


OIL and ONGC have paid differential royalty to State of Assam
August 04, 2016
For the first time, public sector upstream oil companies i.e., Oil India Limited and ONGC Limited made a payment to the Government of Assam, towards differential royalty [i.e., the difference between the rates of royalty as per provisions ‘contained in respective the Production Sharing Contracts and the notified rate of royalty on crude oil production] on pre-discount price for the period from February 01, 2014 to March 31, 2016. Earlier, the differential royalty to the state governments was being paid by the Oil Industry Development Board.


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