Based on a 25-30% recovery rate for oil, and a 10-year extraction window, that translates into 2.5 million tonnes of oil each year; an 80% recovery rate for gas means the field can produce around 10-12 million standard cubic metres per day (mmscmd) each year, which is around what Reliance Industries is producing from all its blocks today.
The price at which the gas will be sold will determine how viable the field is but chances are that by then, gas prices will be fully freed up. The current Rangarajan-formula-based price regime, under which it works out to around $7 per million British thermal units now, comes to an end in FY17, after which the pricing will be determined by the Kelkar committee recommendations. According to a report by global consulting firm IHS Cera, deep-water gas production is not viable at under $10 per mmBtu the 98/2 field is at a depth of 800-3,000 metres. Clarity on whether the tax holiday will be extended to gas will also help decide how viable the field is.
Though ONGC does not have much experience in working in ultra-deep waters, it is already producing gas from the G1 field in the Krishna-Godavari Basin near 98/2 by 2015, this will touch around 2.5 mmscmd. Since ONGCs partnerships with Brazils Petrobras and Norways Statoil came to nought, the PSU oil major will go it alone in 98/2. It has already put out tenders seeking global consultants who can help it with the field development plan and provide other technical expertise.
ONGC had submitted DoCs for crude oil production for the field way back in 2009 and 2010 but had sought more time to explore the area since there was the possibility of finding gas in it as well. ONGC had been granted extra time by the DGH up to December 2013 to drill eight exploratory well, six in the northern area and two in the southern area.
So far, ONGC has made 35 deep-water discoveries seven oil and 28 gas and has drilled 104 deep-water wells.
Of these, 14 were drilled in FY13 alone, and seven of these were found to be bearing hydrocarbons.
The 98/2 block is adjacent to Reliance Industries' KG-D6 block, which in DGH terminology is labelled KG DWN 98/3.
The anomaly of rising oil and gas reserves and stagnating production over the last five years continues to haunt ONGC as new discoveries come on stream slower than the company would like and producing fields face depletion. The reserve replacement ratio since 2005-06 has been greater than 1, indicating that the discovered resources more than replaces production in any particular year, and went as high as 1.84 in 2012-13. Yet the production numbers have hovered around the 51-53 million tonnes of oil equivalent band.