After finding oil in the KG DWN 98/2 field it bought from Cairn India in 2005, ONGC has now found a large reserve of gas and hopes to begin production by FY17. According to the declaration of commerciality (DoC) ONGC submitted to the Directorate General of Hydrocarbons (DGH) last week, the field has 3-4 trillion cubic feet of gas and 90 million tonnes of crude oil, ONGC director (exploration) Narendra Verma told FE. The estimated capex to develop the field is $9 billion by 2030.
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 ONGC’s partnerships with Brazil’s Petrobras and Norway’s 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