CAIRN India has struck significant oil reserves in its Krishna-Godavari (KG) Basin onshore field KG-ONN-2003/1 with production estimated at 8,000-10,000 barrels of oil per day (bopd) starting 2017. This opens up a larger play for Cairn India on the east coast, joining the likes of Reliance Industries (RIL) and Oil and Natural Gas Corporation (ONGC) that have made large finds in the region.
As per the declaration of commerciality (DoC) documents submitted by Cairn to the Directorate General of Hydrocarbons (DGH) on November 29, the company has in-place oil resources of about 320 million barrels, of which about 40 million barrels can be recovered. It has also found small amounts of gas with recoverable reserves of around 70 billion cubic feet (bcf) of gas.
The oil resource estimate is based on the appraisal of three discovered wells in the field — Nagayalanka SE, 1Z and 1Z ST. Cairn will invest around $600 million in drilling 20 wells of the next three to four years and an additional $165 million for creating the infrastructure to produce oil from the field. Oil ministry sources say Cairn India’s reserves in the field can be revised upwards as it drills more wells. The net present value (NPV) of the project stands at around $ 900 million.
Cairn’s KG onshore field has a tight reservoir with low permeability, thus requiring the company to use hydraulic fracking techniques to drill the wells. The recovery factor of the KG field is therefore just 10-15%, while at Ravva, it is as high as 60%.
The sedimentary formations where Cairn’s KG field is located in are also called Mesozoic rocks and these formations formed over 100 million years back have seldom been tapped in India, though they account for nearly 50% of global hydrocarbon finds. Mesozoics are mainly found in the western regions of Narmada, Cambay and Saurashtra, in the east around Cauvery and the KG Basin as well as the north along the higher Himalaya.
According to industry experts, as the investments are lower in the case of onshore fields, the threshold for commerciality is lower and from that perspective, 8,000-10,000