ONGC to invest $4 b to develop KG basin block

STATE-owned Oil &Natural Gas Corp (ONGC) plans to invest $4 billion to develop an ultra-deepwater gas find at its Krishna-Godavari basin block, adjacent to Reliance Industries’ KG-D6 block. The company expects to produce about two trillion cubic feet (tcf) of gas from the field.

“The commerciality report regarding the block (KGDWN-98/2) is submitted to the directorate general of hydrocarbon (DGH) on July 16,” an ONGC official said, while declining to give commercial details of the block. DGH, the technical arm of the oil ministry, is the custodian of the country’s hydrocarbon assets. ONGC estimates in-place reserves of about four tcf in the ultra-deepwater areas (UD-1) of which 56% can be commercially produced, senior ONGC officials said. The inplace reserves of UD-1 is about a third of RIL’s D6 block.

ONGC has so far made 10 gas discoveries in the block including the ultra deepsea find (UD-1). The company holds 90% stake in the project while balance 10% is held by Cairn India. Though, ONGC had off-loaded 15% interest in the field to Petrobras and 10% to Statoil, the two have decided to quit the project.

Establishment of commerciality is a crucial step in monetising oil and gas discoveries. Based on the commerciality, ONGC will submit a field development plan to DGH. Once the plan gets approved, it can develop the field for producing gas. As the process may take three-four years time, the field is expected to start production by 2014-15.

Commercial production of oil and gas is a time consuming process which takes between 7 to 10 years from discovery to commercial production. RIL announced its famous KG-D6 discoveries in 2002 but started gas production in a record time on April 1, 2009.

ONGC had approached the DGH to appraise its finding after it discovered hydrocarbon in the block in December 2006. The directorate gave its nod to the operator to conduct appraisal programme in early 2008. ONGC completed the appraisal programme on schedule and found that the production of gas from the field was commercially viable. The commerciality will be approved by DHG soon allowing the operator to prepare a field development plan.

As per company officials, ONGC has so far drilled 13 exploratory wells in the block, divided into northern and southern appraisal areas. UD-1 discovery lies in the southern discovery area at a depth of 2841 meters. The northern area consists of Padmawati, Kanakadurga, Annapurna, N-1, D/KT, U, A, W and E gas finds in water depths of 594-1,283 meters. The northern area holds a total in-place volume of 115.02 million tonne of oil equivalent.