Ageing fields to pull down ONGC's output by 3% in FY12

The country’s biggest energy explorer and producer, Oil and Natural Gas Corporation (ONGC), which is launching a follow-on public offer (FPO) to sell five per cent stake, is expected to see a decline of three per cent in crude oil production during the current financial year to 23.74 million tonnes (mt).

The company produced 5.933 mt of crude oil during the quarter, down two per cent from same period last year. Its gas production for the quarter was lower by 2.7 per cent at 5.605 billion cubic metres (bcm). The company's full year gas output is expected to increase by 1.58 per cent to 23.46 bcm.

ONGC had taken up 21 improved oil recovery (IOR) and enhanced oil recovery (EOR) and redevelopment projects in 15 major fields. Of these, 15 projects have already been completed and six are under implementation.

By the end of the last financial year, cumulative expenditure on IOR/EOR and redevelopment projects was Rs 25,797 crore. In the six ongoing projects, the likely investment is expected to be Rs 8,300 crore.

ONGC chairman and managing director A K Hazarika said production from domestic fields which were discovered between 1960s and ’80s is bound to decline. “We are investing in joint ventures and overseas (through ONGC Videsh Ltd) to get equity oil. One should analyse the performance after including OVL since we have invested money,” he said.

ONGC’s combined crude oil and gas production (including joint ventures and OVL) rose by 1.84 per cent from 60.93 mt of oil equivalent (mtoe) in FY10 to 62.05 mtoe in FY11.

A company spokesperson said 85 per cent of ONGC’s crude oil production in onshore areas comes from 32 fields, which are over 30 years old and have entered into declining phase. Offshore fields in Mumbai are also more than 30-years-old and have crossed their plateau peak production and are on the decline.

“The Mumbai High North (MHN) field’s shortage of well fluid capacity after the loss of MHN platform in the fire accident in July 2005 contributed to decline. The additional processing capacity is being created with the installation of new MHN process platform, which is expected to be commissioned by May 2012,” the spokesperson said, adding that oil production will start rising from FY14 onwards.

Hazarika said the decline from matured fields globally is eight-nine per cent. “As a result of our efforts of IOR/EOR, we have been able to restrict the decline to just two-three per cent,” he said.

Between 2006-07 and 2010-11, ONGC’s standalone crude oil output declined by 6.26 per cent to 24.419 mt. The production, including the JVs, has also declined by 2.36 per cent to 27.279 mt. Gas production, though it has not declined, has registered a marginal increase. Standalone gas production excluding the JVs rose 2.91 per cent to 23.095 billion cubic metres in the said period while output including the JVs rose merely by 1.65 per cent to 25.323 bcm.