ONGC readies to wade in deep waters alone

Written by Pranav Nambiar | New Delhi | Updated: Nov 20 2013, 10:50am hrs
Oil and Natural Gas Corporation (ONGC) will go solo in developing its most promising deep-water hydrocarbon block in the Krishna-Godavari (KG) Basin with help of consultants as potential international partners like Shell and ConocoPhillips have shied away from taking stakes or providing technological expertise.

Harnessing potential resources in deep-water blocks is crucial to the state-run explorers plan to augment oil and gas output which has stagnated if not declined in recent years, despite a reasonable accretion to reserves.

Sources say ONGC will invite international consultants in the sector such as Aker Solutions, Technip, Pegasus and Worley Parsons soon to place bids for preparing the field development plan (FDP) for its KG-DWN-98/2 block. ONGC has little experience in developing offshore deep-water blocks and will therefore issue tenders inviting global consultants to help us prepare the FDP for the block, said an official directly involved in the matter.

Though the company has been trying to woo the likes of Shell and ConocoPhillips for joint development of the block for around a year now, they have so far remained non-committal.

ONGCs KG blocks had received interest from international players in the past but delays on the part of the government in approving the proposals 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 inked.

ONGCs KG basin blocks holds about 4.85 trillion cubic feet of gas reserves (22 million metric standard cubic metres per day of gas at peak production) and indicated oil reserves of around 100 million tonnes. They will be the companys first significant producing block in the technologically challenging deep-water zone when it comes on stream in 2017-18.

FDPs comprise of activities and processes that are required to develop a field. As ONGC does not have expertise in developing deep-water fields, it requires assistance in understanding various aspects of production from these zones including environmental impact, geophysics, geology, reservoir and production engineering, infrastructure, well design and construction, completion design, surface facilities, and economics and risk assessment.

ONGC officials say that the company plans to complete preparing the FDP by March 2015 and hopefully start production about two years later. ONGC is currently running the appraisal programme for the wells and expects to submit the declaration of commerciality to the Directorate General of Hydrocarbons in December.

ONGC officials say that they can produce from deep-water blocks on their own but an international exploration company as a partner would help bring in greater efficiencies and cost effectiveness due to their experience in handling deep-water blocks in different geographies.

ONGC officials are, however, still hopeful that international partners like ConocoPhillips will at some stage in the future participate either as equity or technology partners. With ConocoPhillips we have an MoU for deep-water exploration. They are always welcome to participate in the block, said AK Banerjee, director (finance) at ONGC.

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 few months ago. So far ONGC has made 35 deep-water discoveries (seven oil and gas and 28 gas discoveries) and has drilled 104 deep-water wells as on March 31. In FY13 alone, 14 wells were drilled, of which seven were found to bear hydrocarbons.

ONGC has lined up a massive capital expenditure plan of around Rs 51,500 crore or close to $9 billion for the block by 2030. The block was awarded in the NELP round in 2000 to Cairn, which offloaded a 90% stake to ONGC in 2005 before selling out completely.