ONGC to produce gas from first deepwater field soon

Natural gas production, to begin with will be around 1.1 mscmd and will peak at 2.6 mscmd

Come August, state-run Oil and Natural Gas Corporation (ONGC), would begin natural gas production from its first deepwater field, G-1, located in the Krishna-Godavari Basin on the eastern coast. A senior ONGC official told Business Standard:  “We are ready to produce from our G-1 field. By August, two gas wells will flow. Next year, we would flow oil as well,” the official said.

Initially, production would be about 1.1 million standard cubic metres a day (mscmd). The gas produced would be sold to GAIL India at $4.75 a million British thermal unit (mBtu), while oil will be sold at $50 a barrel, putting the assets’ net present value at Rs 1,437 crore. “While oil production will peak at 1,200 cubic metres a day (9,000 barrels) in the next two years, gas will peak at 2.6 mscmd. The field’s life is 15 years,” the official said. Initially, ONGC had planned to start production from the G-1 field in April 2006, at a cost of Rs 1,200 crore.

But owing to delays, the project has seen cost over-runs. The project’s cost on Monday stands at Rs 2,735 crore. “We integrated the development of the neighbouring GS-15 field in the project.

GS-15 began production in August 2011 and has since been producing 1,90,000 cubic metres of gas a day and 9,400 barrels of oil a day.

Last week, ONGC had signed a memorandum of understanding with Reliance Industries Ltd to avail of RIL’s offshore and other infrastructure on the east coast. “Worldwide, the practice is to use infrastructure available in any area. This is what the arrangement with Reliance Industries would be,” the official added.

“The MoU aims at working out the modalities for sharing infrastructure, identifying additional requirements, as well as firming up the commercial terms,” ONGC had said in a release, adding the companies intended to enter into a formal agreement after conducting a joint study to be spread through the next nine months.

For natural gas produced from the KG-D6 block on the east coast, RIL has set up huge infrastructure, including sub-sea and onshore pipelines and onshore processing terminals. The facilities are capable of handling up to 80 mscmd of gas. RIL, which has seen gas production from its fields decline from 69 mscmd to 14 mscmd, hasn’t being able to use the facility optimally.

By using RIL’s infrastructure, ONGC, whose oil and gas blocks are located close to RIL’s, would cut capital expenditure.

This April, ONGC announced its tenth discovery in the KG-DWN-98/2 block.

ONGC has said it plans to make substantial investment in developing its deepwater blocks through the next five years. The company has set a target of producing six-nine mscmd of gas by mid-2017 from the G-4, KG-DWN---D & E fields, in the first phase.