1. ONGC to spend $6-7 bn on KG block: Sarraf

ONGC to spend $6-7 bn on KG block: Sarraf

State-run ONGC, the country’s largest oil and gas producer, will spend about $6-7 billion to take out hydrocarbons from the KG-DWN-98/2 block off the east coast...

By: | New Delhi | Updated: August 14, 2015 1:17 PM
In 2000, two deep-water blocks in the Krishna-Godavari (KG) Basin were awarded by the government, one to Reliance Industries and the other to ONGC.

In 2000, two deep-water blocks in the Krishna-Godavari (KG) Basin were awarded by the government, one to Reliance Industries and the other to ONGC.

State-run ONGC, the country’s largest oil and gas producer, will spend about $6-7 billion to take out hydrocarbons from the KG-DWN-98/2 block off the east coast over the next three years, a move that could help the investment cycle to pick-up. Gas production from the offshore deep-water block is likely to commence in 2018 while crude oil production could start from 2019, ONGC chairman and managing director Dinesh K Sarraf said on Thursday.

In 2000, two deep-water blocks in the Krishna-Godavari (KG) Basin were awarded by the government, one to Reliance Industries and the other to ONGC.

RIL took the lead and first commercially produced gas in April 2009 from its block KG-DWN-98/3, commonly known as the KG-D6 block. The private-sector firm has so far invested up to $9 billion for the block’s development.

ONGC, however, has not extracted any hydrocarbon from the block till now partly due to the subsidy burden on it that reduced its capex ability. Of late, the subsidy obligation on the company, which reported a 14.2% year-on-year increase in net profit to R5,460 crore for Q1FY16, has been reduced by the government.

Sarraf said that the company’s board has given the go-ahead to a ‘draft field development plan (FDP)’, which would be submitted to upstream regulator Directorate General of Hydrocarbons (DGH) this month for approval so that the DGH could start scrutinising the ‘technical parts.’

“The final investment number is yet to be finalised. But it would be in the range of $6-7 billion. The company board would again take up the final FDP,” Sarraf told media persons. He, however, did not divulge the in-place reserves of the block that were taken into consideration while making the FDP.

Sarraf said that the bock at peak output level would produce 77,000 barrels per day of crude oil and nearly 16-17 million metric standard cubic metres per day of gas.

The $6-7 billion of investment would be spent to exploit only a part of the KG-DWN-98/2 block. The entire block is divided into two areas, northern and southern discovery areas.

The northern area is further bifurcated into cluster I and II. The mentioned investment would be made for monetising cluster II of the northern discovery area. The northern area is spread over 3,800 sq km, while the southern area covers 3,494 sq km. The cluster II area has both oil and gas and includes oilfields (cluster 2A) A2, P1, M3, M1 and G-2-2. The gas fields (in Cluster 2B) are R1, U3, U1, and A1.

When asked if the current domestic gas price, which hovers at $5.18 per million British thermal units is economically viable for the KG Basin deep-water block, Sarraf said that cost is irrespective of gas or oil price. “We are yet to do the final cost-economics,” he said.

On July 14, an industry web site Indiapetroplus reported that while the total oil initially in place in the KG-DWN-98/2 block is estimated at 106 million cubic metres, production of only 26.71 million cubic metres is envisaged during 2019-2031. Similarly, the gas initially in place is estimated at 69.57 billion cubic metres (bcm), of which only 51.33 bcm can be produced during 2018-34.

Shoring Up:

* ONGC to spend $6-7 bn to extract hydrocarbon from KG-DWN-98/2
* Production of gas to commence in 2011, crude oil in 2019
* Peak oil production could be 77,000 barrels per day
* Gas ouput could touch a peak  of 16-17 million metric standard cubic metres per day
* ONGC board gives go-ahead to the draft field development plan
* The investment would be made for monetising a part of the block

Tags: ONGC
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