ONGC plans $11 billion investment to boost gas production by 30%

ONGC plans to put into production its gas blocks in the KG Basin and Ratna and R-Series oilfields in Mumbai offshore by 2019

After more than a decade of nearly static output, state-run Oil and Natural Gas Corp. (ONGC) expects to increase gas production by nearly 30% over the next three-four years with an investment of around $11 billion, according to two senior company officials with knowledge of the matter.

The officials said ONGC will put its blocks in the Krishna Godavari basin (KG-DWN-98/2) and Ratna and R-Series oilfields in Mumbai offshore into production by 2019. The coal bed methane (CBM) blocks in Jharkhand will begin production by 2020, while the Daman offshore fields, which have been pressed into production this month, will be ramped up next year.

“Our production has been stagnant but some discoveries are in the pipeline. In the next three-four years gas production for ONGC should be up by 30%,” the first ONGC official cited above said on condition of anonymity.

He said, while KG-DWN-98/2 will be pushed into production by 2019, Daman will begin production shortly and be ramped up by 2018.

ONGC currently produces around 23 billion cubic metres (bcm) of gas a year, which is expected to go up to 29-30 bcm in four years. However, gas production at some existing fields is projected to drop to 11.8 bcm in four years from the current 19.73 bcm.

The first official said given that production from the existing fields is declining, some part of the fresh gas production would go toward compensating that loss.

ONGC did not reply to an email sent on 13 April.

The company plans to invest more than $10-11 billion in exploration, a major chunk of which would go towards developing the KG block. It plans to develop KG-DWN-98/2 in three clusters, said the first official cited above.

The ONGC board last month approved the field development plan for fields falling under Cluster II, the first cluster to be developed. The development will involve a capital expenditure of $5.08 billion, ONGC said in a statement on its website. Cluster II will produce its first gas by June 2019, according to the statement.

The Ratna and R-series fields, lying 130km off the Mumbai coast, will be put to production from 2019. The fields were returned to ONGC last March, 22 years after they were awarded to Essar Oil. The Ratna and R-series oil fields hold an estimated 87 million barrels of oil and 1.2 bcm of gas reserves.

Last fiscal, ONGC drilled 501 wells against 386 in 2015-16. The second official quoted above said the company has achieved this number for the first time in more than two decades. “Success of drilling will ensure establishment of newer resources and augment production,” he added. ONGC spent Rs15,747 crore in drilling these wells.

The Daman offshore project, which will begin production from this month end or early next month, will contribute around 2 to 3 million metric standard cubic metres per day (mmscmd) of gas from May.

Phase II of the Daman project will be completed by next May and would add another 3 mmscmd to overall production. Total production would be ramped up to 8 mmscmd by 2020.

“ONGC has become quite aggressive on its discoveries and production, something that was lacking thus far. At a time when the government is pushing to bring down natural gas imports by 10%, it bodes well for ONGC and its prospects going forward,” said an oil and gas analyst with a Mumbai-based broking firm, speaking on condition of anonymity as he is not allowed to speak to the media. 

ONGC has also started work on its coal bed methane (CBM) project. Methane is a form of natural gas extracted from coal beds. “Land acquisition for the project has been completed. By September, we would begin the drilling and then once we have sufficient number of wells, we can put them into production,” said the second official quoted above.

ONGC holds four CBM blocks. Two—North Karanpura and Bokaro in Jharkhand—will start production by the second half of 2017-18. Production after the development of all four blocks is estimated to be about 1.7 mmscmd.

The company has sold a 25% stake in its North Karanpura CBM block to Prabha Energy Pvt. Ltd, a unit of Deep Industries Ltd. The block in Bokaro will be developed by ONGC.

The explorer also plans to begin work shortly on the high-pressure high temperature Deen Dayal West field in which it acquired 80% from Gujarat State Petroleum Corp. this February for $1.2 billion.