ONGC looks deep to increase resources
  from: Asian Oil & Gas
  by: Terry Knott
  Thursday, August 24, 2006

India's state energy company ONGC has been busy setting out its deepwater stall of late as the country strives to attract foreign investment to address the growing energy gap for its one billion population. Terry Knott rounds up the key points.

While that subsea contract is for operator Reliance Industry's KG-D6 development, India's state energy company, Oil & Natural Gas Corporation (ONGC), has also been taking every opportunity recently to send out similar deepwater signals.

'In 2003 we launched the industry's largest deepwater development campaign by a single operator,' ONGC chairman and managing director, Subir Raha, told OTC Houston delegates in May. 'We have a 47-well drilling programme over five years, with three deepwater rigs currently at work. Last year we completed a well in 3052m of water in the Saurashtra area off the west coast, the second deepest well yet drilled in Indian waters.'

India is the world's fourth largest economy and last year had GDP growth of 8.3%, second only to China. The country is the fifth largest energy consumer in the world and the sixth largest oil consumer, taking some 3.2% of global demand.

'However, that is only a part of the story,' added Raha. 'The average per capita Indian consumption is one third of the global average, and only one fifth of the US average. So, to increase the per capita figure even by 1kg, we need a billion kilograms of the resource in absolute terms. That is the size of the problem for India - and the size of the opportunity for global business.'

Last year the company, India's largest with a market capitalisation of $43 billion, produced just over 1 million boe/d, contributing around 80% of domestic production - figures which prompt Raha to point to the 'huge energy supply and demand gap'.

Faced with the challenge of preventing the energy gap from widening still further as India's population increases, ONGC is actively pursuing several initiatives to enhance its offshore oil and gas production. Key among these is the development of deepwater acreage around the nation's eastern and western coastlines - some 1.35 million km² of India's 1.74 million km² of offshore sedimentary basins lie in water over 400m deep. Hence the Sagar Sammriddhi campaign.

Sagar Sammriddhi - or 'prosperity from the ocean' - has a budgeted expenditure of around $1 million a day and forms part of the company's strategic goal of doubling its current oil and gas in-place reserves to 12 billion tonnes by 2020.

ONGC operates 31 deepwater blocks, 18 off the east coast and 13 off the west. In the east, the company has made 10 discoveries to date in the Mahanadi and Krishna- Godavari areas, with exploration ongoing in the Cauvery region and seismic under way in Andaman, 'where there are positive indications' added Raha.

In the west, exploration is continuing in the Gujarat, Saurashtra, Kerala and Konkan areas, and also off Mumbai, where the Mumbai High field - in shallow water - is now delivering around 45% of India's overall oil production, having come onstream some 20 years ago.

ONGC's output last year was 1.2 million boe/d, 1.1 million of this being from domestic fields and the remainder from overseas equity, where ONGC participates in 22 licences in 13 countries through its operating arm ONGC Videsh. In deepwater licences in India, the company's partners include BG in three blocks, Cairn Energy in one block and Eni in two blocks plus another onshore.

'We are currently in discussions with BP and BHP Billiton, and they have agreed in principle to farm in to some of our licences,' said Raha.

ONGC sees collaboration with overseas companies, both oil companies and contractors, to be a vital part of its expansion strategy, and is actively seeking contracting and service company partners to undertake lump sum turnkey contracts, and oil companies to farm in to exploration licences.

'India's New Exploration Licensing Policy (NELP) was launched in 1999 to establish the acquisition of acreage only though competitive bidding and permits farm-ins to existing licences,' Raha explained. 'Since then there have been five NELP rounds offering 144 exploration blocks, of which 109 have been awarded. Of these, 39 are deepwater blocks, split between ONGC (22) and Reliance (17) - ONGC's other nine deepwater blocks were 'nomination blocks', awarded pre-NELP.'

In its drive to form relationships with international players, in January this year ONGC notably signed a memorandum of understanding (MoU) with Shell to pursue global business opportunities across the petroleum spectrum.

In the upstream arena, that MoU envisages a risk-reward approach optimisation of ONGC's producing fields and integrated field development, with cooperation to increase and enhance production from existing producing fields in India, joint bidding in exploration acreage rounds in India and farming into existing, but undeveloped, Indian exploration blocks. The MoU also holds out the possibility of co-operation and joint participation in international upstream ventures from Shell and ONGC's portfolios. AOG