ONGC technically sound to handle offshore ops

Written by Noor Mohammad | Noor Mohammad | New Delhi | Updated: Nov 30 2009, 05:46am hrs
Public sector oil upstream major ONGC is not hobbled by any technological constraints in undertaking exploration and production of oil and gas in its offshore blocks. Because of its internal research and development (R&D) centres, the company has developed enough technical expertise to manage drilling in such fields, says Sudhir Vasudeva, the companys director for offshore operations. Oil upstream major is getting about 75% of its production from offshore areas.

There is no technological handicap for offshore drilling. The company is equipped with 12 R&D institutes, Vasudeva told FE.

Exploration of hydrocarbon acreages in deep and ultra deep water is even more technologically challenging and a high-risk area. It requires huge capital investment. According to industry estimates, drilling costs for ultra deep water blocks can go up to as high as $1.5 million a day at current prices. Only companies with deep pockets go into it. Shortage of rigs is another problem that exploration companies usually face. But it is a very promising area, indeed. ONGC has struck oil and gas, though after hitting many dry wells.

ONGCs deep water drilling programme has been very successful. The company has made big discoveries in its KG, Mahnadi blocks, Vasudeva said. ONGC expects to start appraisal work in its discovered fields in the financial year 20010-11after the rig hired from Vantage company arrives.

As an upstream company, ONGC spends Rs 20,000-24,000 crore every year for undertaking exploration and on an average drills 400 wells, that is, a little over one well a day.

While the companys exploration costs are going up, price of APM gas supplied by the company has not been revised for a long time. As a result, the company is suffering under-recoveries on sale of APM gas. But meanwhile, the company is getting international price for its crude production. ONGC gets bulk of its gas supplies in the form of associate gas, which comes out with crude oil.The global oil industry is adding reserves at a slower pace than it is producing. This has led to a decline in reserve replacement ratio of many key oil companies. Meanwhile, production from existing fields is expected to halve by 2020.

Globally, not many big discoveries have been made in onland fields in recent years. That has forced major oil companies including ONGC to intensify their focus on offshore drilling.