ONGC has consistently missed its production targets over the last five years despite a healthy reserve replacement ratio (1.84 in FY13) due to project delays and most new finds being in difficult terrain.
Confirming the find of oil reserves to the tune of 100 mt (700 million barrels) in the block, ONGCs director (exploration) Narendra Verma told FE that oil was struck in three out of six appraisal wells drilled in the block. With two more appraisal wells remaining to be drilled, a further upside to oil reserves is possible and the estimate is subject to (upward) revision, Verma said.
ONGC has lined up a massive capital expenditure plan of around R51,500 crore or close to $9 billion for the block by 2030. The block was awarded to Cairn in the NELP round in 2000, which offloaded a 90% stake to ONGC in 2005 before selling out completely.
The public sector company had earlier made seven discoveries (mostly gas) in the block that has been divided into northern and southern discovery areas.
The declarations of commerciality (DoC) of these were submitted in 2010 and 2009, respectively. ONGC was subsequently granted an extension to its exploration period in the block up to December 2013 for drilling eight appraisal wells.
As the recovery factor for oil ranges between 25% and 30%, if the current oil estimates hold ONGC might be able to recover around 30 mt or around 200 million barrels of oil from the block. We are now planning to set up a floating production, storage and offloading unit to store the oil as well, Verma said.
The oil find at 98/2 is in addition to the 4.85 trillion cubic feet of natural gas reserves the block is said to hold. The commencement of natural gas production from the block is targeted by 2017-18, with an estimated peak output of 22 million metric standard cubic metres per day (mmscmd). ONGC chairman Sudhir Vasudeva had said that the company was pinning its hopes on the block to contribute significantly to the incremental 35 mmscmd of gas ONGC will produce by 2017-18.
ONGC is now working on submitting a revised DoC to the Directorate General of Hydrocarbons (DGH) by December after accounting for the oil finds. In January it also plans to submit a revised field development plan (FDP).
Due to ONGCs relative inexperience in developing deepwater blocks, it has sought foreign partners to invest and share technology. While ConocoPhilips has not shown interest in investing in the 98/2 block, ONGC is still awaiting a response from Shell. ONGCs KG block has received interest from international players in the past as well but delays in approving their participation stymied their entry. Though the farm-out agreements for giving 15% to Brazils Petrobras and 10% to Norways Statoil were signed in 2007, a joint operating agreement could not be signed.
It has been close to 60 years since ONGC was set up and has just one marginal field, G-1, that is a producing asset, which commenced production just a couple of months ago. So far ONGC has made 35 deepwater discoveries (seven oil & gas and 28 gas discoveries) and has drilled 104 deepwater wells as on March 31. In FY13 alone, 14 wells have been drilled, of which seven were found to bear hydrocarbons.
* It has now turned out that ONGCs most promising gas block in the KG Basin also holds significant volumes of crude
* ONGC recently struck oil in appraisal wells in the block and studies indicate potential reserves of 100 mt of oil
* ONGC was granted an extension for exploration in the block up to December 2013 for drilling 8 appraisal wells.
* The oil find is in addition to estimated natural gas reserves of around 4.85 trillion cubic feet
* With the oil find, ONGC will now submit a revised declaration of commerciality to DGH by December