ONGC awaits DGH nod for $5 bn KG-D5 gas development plan

State-owned Oil and Natural Gas Corp is awaiting nod of upstream regulator DGH to commence investing USD 5.07 billion in bringing to production oil and gas discoveries in its Bay of Bengal block KG-D5.

About a year back ONGC submitted to the Directorate General of Hydrocarbons (DGH) a field development plan (FDP) for bringing to production 10 oil and gas discoveries in KG basin block KG-DWN-98/2 (KG-D5), which sits next to Reliance Industries flagging KG-D6 fields.

DGH so far has not approved the FDP, an official said.

A meeting of the block oversight panel, Management Committee (MC) headed by DGH, has been called next week to review the FDP, he said. "Without waiting for the approval, tendering for long-lead items has started to ensure the 2019- 20 schedule for starting production is not missed," he said.

The board of ONGC had on March 28 approved an investment of USD 5,076.37 million for developing Cluster-II discoveries to flow natural gas from from June 2019 and oil by March 2020.

"While the FDP was submitted a year, the board gave investment approval in March after the government allowed higher rates for deepwater discoveries, thus making KG-D5 viable," he said, adding since then DGH nod is awaited.

In 2014, ONGC had announced plans to start gas production from 2018 and oil by 2019 but a final investment decision was made contingent upon government approving a remunerative price for the deepsea block as the current rate of USD 2.5 per million British thermal unit was unviable.

The government in March announced a new pricing formula for difficult areas that would at current prices give developers just about USD 6 per mmBtu price. KG-D5 gas fields are viable at that price, he said.

The 7,294.6 sq km deepsea KG-D5 block has been broadly categorised into Northern Discovery Area (NDA - 3,800.6 sq km) and Southern Discovery Area (SDA - 3,494 sq km).

The NDA has 11 oil and gas discoveries while SDA has the nation's only ultra-deepsea gas find of UD-1. These finds have been clubbed in three groups - Cluster-1, Cluster-II and Cluster-III.

Gas discovery in Cluster-I is to be tied up with finds in neighbouring G-4 block for production but this is not being taken up currently because of a dispute with RIL over migration of gas from ONGC blocks, the official said.

From Cluster-II a peak oil output of 77,305 barrels per day is envisaged within two years of start of production. Gas output is slated to peak to 16.56 million standard cubic meters per day by end-2021.

Cluster-2A mainly comprises of oil finds of A2, P1, M3, M1 and G-2-2 in NDA which can produce 77,305 bpd (3.86 million tonnes per annum) and 3.81 mmscmd of gas.

Cluster 2B, which is made up of four gas finds -- R1, U3, U1, and A1 in NDA -- envisages a peak output of 12.75 mmscmd of gas, the official said, adding that peak output is likely to last 7 years.

Cluster-3 is the UD-1 gas discovery in SDA in ultra deepsea that poses technological challenges.