ONGC BUCKS TREND, BUILDS ASSETS AMID OIL PRICE SLUMP
CMD DINESH K SARRAF POWERS NATIONAL OIL & GAS FIRM’S SPECTACULAR PERFORMANCE
Global oil majors have slashed spending and cut jobs in response to plunging oil prices but state-owned Oil and Natural Gas Corporation (ONGC) is using the slump to build assets. Oil majors including Shell, Total and BP have cut capital spending by at least $14 billion this year in response to the plummeting oil price.
Addressing company shareholders, ONGC Chairman and Managing Director Dinesh K Sarraf said energy industry, particularly the oil and gas sector, was facing challenging times due to the collapse of crude prices.
Oil prices, he said, have collapsed from $110 per barrel to sub-50 dollars a barrel due to lower growth in demand than expected from China, slow recovery in some of the developed economies and steady build-up of new supplies backed by strong North American output.
“While many of the global E&P companies have responded to this situation by cutting down their investments, ONGC takes this as an opportunity to build its assets in this environment of lower costs as well,” he said.
ONGC, he said, remains “steadfastly committed to the quest of energy security, a national priority endorsed by none other than our Prime Minister.” Sarraf said ONGC has stepped up ongoing development efforts to bring new hydrocarbon volumes into the country’s energy basket. “Important projects have been given the
go-ahead for development and more proposals to monetise our reserves are under various stages of finally being approved.”
Having reversed the decline in crude oil production in 201415, Oil and Natural Gas Corporation (ONGC) is now fully focused on implementing programmes to raise output from ageing and old fields.
“Every drop counts and ONGC’s production track record from its predominantly mature portfolio and commercially prudent and holistic management of producing assets is really remarkable,” he said.
Improved Oil Recovery and Enhanced Oil Recovery projects to maximise production have yielded positive outcomes - in 2014-15 over 34 per cent of ONGC’s crude production was a result of investments in these projects, he said.
“In fact, effective and judicious deployment of technological interventions have enabled your company to reverse the decline in domestic crude oil production in the last financial year,” he told shareholders.
Overall decline rate of ONGC’s mature portfolio is 2 to 3 per cent compared to 6 to 7 per cent encountered globally in similar fields. Sarraf said ONGC has invested Rs 36,187 crore in these projects and realised an incremental oil gain of close to 95 million tons till FY’15. The dollar value of the incremental production from these projects in FY’15 alone stood at $4.5 billion - around 4 per cent of country’s forex outgo on imports.
ONGC MAKES 13TH OIL AND GAS DISCOVERY IN KG-D5 BLOCK
ONGC has made another discovery in its Bay of Bengal block KG-D5, taking the number of finds in the area to 13. ONGC discovered oil and gas in the well F-1 in the northern part of the KG basin block KG-DWN-98/2 or KG-D5, which sits next to the flagging KG-D6 block of Reliance Industries. “On conventional testing, exploratory well F-1 flowed oil at the rate of 732 barrels per day and gas at the rate of 13,155 cubic meters a day,” ONGC Chairman and Managing Director Dinesh K Sarraf told reporters.
The 7,294.60 sq km deepsea KG-D5 block has been broadly categorised into Northern Discovery Area (NDA - 3,800.6 sq km) and Southern Discovery Area (SDA - 3,494 sq km). The latest discovery has been made in NDA. ONGC plans to develop the discoveries in three clusters -- 14.5 million standard cubic meters per day of gas for 15 years from Cluster-1 comprising of D&E finds of NDA in KG-D5 block and G-4 find in the neighbouring area. Cluster-2A mainly comprises of oil finds of A2, P1, M3, M1 and G-2-2 in NDA which can produce 75,000 barrels per day (3.75 million tonnes per annum).
Cluster 2B, which is made up of four gas finds -- R1, U3, U1, and A1 in NDA -- envisages a peak output of 14 mmscmd of gas, with cumulative production of 32.5 bcm of gas in 14 years. “We are initially looking at developing Cluster-2,” he said. “We plan to get first gas by mid-2018 and first oil by mid-2019.” Cluster-3 is the UD-1 gas discovery in SDA. UD-1 lies in water depth of 2,400-3,200 meters and there is no technology to produce from such depths. And so Cluster-3 is presently not being pursued for development.
D.K. SARRAF, CHAIRMAN AND MANAGING DIRECTOR, ONGC