India’s ONGC eyes BP’s sea of trouble
Indian state-run firm plans to invest in a deepwater region off country’s east coast
India’s Oil & Natural Gas Corp is wading into deep waters where energy giants BP Plc and Reliance Industries Ltd found a sea of trouble.
State-run ONGC plans to invest in a region off India’s east coast to help boost natural gas output and raise crude flows, said Tapas Kumar Sengupta, its director for offshore operations. The nation’s top explorer will spend about Rs648 billion (Dh36.3 billion, about $10 billion) in deepwater projects in the Krishna-Godavari Basin, according to Oil Minister Dharmendra Pradhan.
ONGC is betting that it can pry more out of the resourcerich area by studying hurdles faced by other companies. Reliance and partner BP have a project in the basin that’s producing only 9 per cent of its target. Unearthing deposits from the region, where the depth of water is comparable to those in the US Gulf of Mexico, are critical to Prime Minister Narendra Modi’s plans to cut energy imports and help narrow a budget deficit.
“The east coast is our future because western offshore fields are in a heavy declining trend,” Sengupta said in an interview in his office in New Delhi. “To keep India’s gas production alive, the east coast needs to make a tremendous contribution in the next two decades.”
The country’s biggest hydrocarbon producer expects the area, including its KGDWN-98/2 block, will add about 40 million standard cubic metres to daily gas production within five years, according to Sengupta. That’s almost half of India’s net gas production of 84 million standard cubic metres a day from April 2016 to February this year. Oil output could rise by 77,000 barrels a day, he said.
ONGC’s block lies next to Reliance’s KG-D6, one of the biggest discoveries of the year when it was found in 2002. Production there has tumbled about 85 per cent since hitting a peak in 2010 as the private Indian company and BP found the reservoir is more difficult to produce from than they had initially estimated.
Gas production at the KG-D6 block was 2.64 billion cubic metres during the 11 months to February, compared with a target of 29.32 billion for the fiscal year ending March 31, Oil Minister Pradhan said in parliament on March 20. Reliance, controlled by India’s richest man Mukesh Ambani, and BP were forced to shut most of the wells producing gas from the KG-D6 block after water and sand started entering them. Production also declined because of low flow pressure and natural decreases of deposits in the wells. Technological developments over the past few years may help ONGC avoid similar pitfalls. “We have confidence the technology can mitigate the risks of developing such high-risk areas,” Sengupta said.