ONGC plans sep­a­rate divi­sion for dif­fi­cult fields


Resource Digest - - CONTENTS -

The coun­try’s largest hy­dro­car­bon pro­ducer Oil and Nat­u­ral Gas Cor­po­ra­tion (ONGC) plans to spin off its dif­fi­cult fields into a sep­a­rate divi­sion that in­cludes Gu­jarat State Petroleum Cor­po­ra­tion's Deen­day­alu­pad­hyaya dis­cov­ery in the Kr­ishna Go­davari (KG) basin.

Be­sides, the com­pany has chalked out a de­tailed plan for de­vel­op­ment of its ex­ist­ing KG basin as­sets af­ter in­te­gra­tion with GSPC fa­cil­i­ties. It was this in­te­gra­tion that added value to the $1.2 bil­lion deal with GSPC, D K Sar­raf, chair­man and man­ag­ing di­rec­tor, ONGC, said.

An an­a­lyst, how­ever, said ONGC had paid more money for the GSPC as­set than its over­seas arm ONGC Videsh had paid for the Vankor as­set in Rus­sia to Ros­neft. “In terms of value per tril­lion cu­bic feet of gas, ONGC’S over­seas arm got it for half the price,” said the an­a­lyst who re­quested anonymity.

ONGC Videsh bought a 26 per cent stake in Vankor for about $2.2 bil­lion and ONGC bought GSPC’S 80 per cent stake in KG-OSN-2001/3 for $995.26 mil­lion.

This block has the Deen­dayal West (DDW) field. ONGC will pay an ad­di­tional $200 mil­lion for six dis­cov­er­ies once the field de­vel­op­ment plan is ap­proved and re­serves have been cer­ti­fied by the man­age­ment com­mit­tee and the Direc­torate Gen­eral of Hy­dro­car­bons.

When asked about the lower val­u­a­tion of the Vankor block com­pared to the GSPC as­set, Sar­raf said the rate of re­turn for pro­duc­ers in Rus­sia was much lower due to higher taxes. “When crude oil was $100 a bar­rel, we earned just about $20 from Rus­sian as­sets,” Sar­raf said.

Ini­tially, the GSPC deal size was ex­pected to be in the range of $2-2.5 bil­lion but ONGC brought it down to $1.2 bil­lion.

“In oil ex­plo­ration and pro­duc­tion, wells, plat­form, pipeline and on­shore pro­cess­ing fa­cil­i­ties are im­por­tant. GSPC has built these fa­cil­i­ties at a cost of more than $1.52 bil­lion,” Sar­raf said.

He added four wells had been drilled and ONGC was in­volved with GSPC in drilling a fifth well.

Sig­nif­i­cant amounts of hy­dro­gen sul­phide and car­bon diox­ide, be­sides low per­me­abil­ity and poros­ity made the field dif­fi­cult, he said. “Well 4 is a par­tial suc­cess since it was not de­signed for hy­dro-frack­ing. This is­sue is be­ing ad­dressed. Well 5 is be­ing de­signed with hy­dro frack­ing. We will drill 32 sim­i­lar wells over a pe­riod of time,” he said.

GSPC is pro­duc­ing a mi­nus­cule quan­tity of nat­u­ral gas from the ex­ist­ing well.

The en­tire ONGC busi­ness in dif­fi­cult ar­eas of high-pres­sure, high-tem­per­a­ture (HPHT) will be a sep­a­rate divi­sion on the lines of its coal-bed meth­ane and Mum­bai busi­nesses. The new divi­sion will in­clude Na­gay­alanka, Machili­pat­nam, Nizam­pat­nam, Cau­very off­shore, Kutch off­shore and blocks in the Kr­ishna Go­davari basin.

“All our knowl­edge of HPHT and GSPC’S ex­pe­ri­ence will be used in spin­ning off a sep­a­rate as­set. All ONGC’S HPHT as­sets mi­grat­ing from ex­plo­ration phase will be part of the divi­sion,” Sar­raf said.

Fa­cil­i­ties put up by GSPC will be used for ONGC’S KG-DWN-98/2 block as well.

“Most of the gas from this block is gone (has been pro­duced by Re­liance In­dus­tries that holds the lease for the ad­join­ing KG-D6 block). Our abil­ity to de­velop Clus­ter I on a stand­alone ba­sis is lim­ited. We can­not jus­tify high cap­i­tal ex­pen­di­ture with lit­tle gas,” he said. Along with DDW, ONGC is aim­ing to pro­duce at least 1 tril­lion cu­bic feet of gas from the block.

ONGC has an­other clus­ter in the KG basin that re­quires sep­a­rate pro­duc­tion fa­cil­i­ties. With the GSPC pur­chase, the pro­duc­tion fa­cil­i­ties of Clus­ter 1 can be con­nected with a pipeline. The pro­duc­tion from these fields could act as backup in case of a break­down, Sar­raf said.

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