Going Offshore

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Thursday , April 17, 2008 at 1943 hrs chief executive officer. He says, “The shift from onshore to offshore is definitely happening.”

It is expensive to take up offshore exploration, but that is not deterring players such as RIL and ONGC. Even companies such as HPCL, BPCL (Bharat Petroleum Corporation Ltd), GAIL (Gas Authority of India Ltd), GSPC (Gujarat State Petroleum Corporation) and OIL (Oil India Ltd) tied up with ONGC to bid for deep-water blocks in the last round of NELP.

HPCL, BPCL and OIL, in particular, have been partners with ONGC in earlier NELP rounds.

The expenditure can be gauged from the following data. The cost of digging an onshore well about 1,500 metres deep is about Rs 4-5 crore. If the well is a bit deeper at about 3,000-4,000 metres, the cost goes up to about Rs 30 crore. At 4,500 metres, it is about Rs 40-50 crore. In shallow waters, the cost of digging a well is over Rs 50 crore. In deeper waters, the figure goes up to at least Rs 200 crore. Naturally players lacking access to capital and technical collaborations cannot get into offshore exploration. As R S Sharma, chairman and managing director, ONGC, explains, “Offshore exploration is not something that small companies can undertake. The risks are more, but the rewards are also much more.”

As easy oil becomes difficult to find, experts contend that good reserves can only be found if companies push themselves into difficult terrain. According to DGH, 46% of area on land has already been covered under NELP. Deep-water area covered under NELP, however, is merely 40%. This means that a sizeable chunk of India’s deep waters are still untapped. That is 50%, says DGH.

Exploration of this region then becomes critical, as India’s energy needs surge by the day. India produces 33 million metric tonne (MMT) of crude oil per annum. It’s merely a third of its consumption, which is 120 MMT per annum. The story on gas production is no different. India produces merely 90 million standard cubic metres per day (MMSCMD) of gas, which is a fraction of its consumption at over 230 MMSCMD.

Increasing the quantum of domestic production is important if India has to reduce its dependence on imports. India is the ninth-largest importer of crude oil in the world.