Petroleum Ministry Takes Innovative Decisions To Increase Domestic Hydrocarbon Production And Mitigate Upheavals In Global Energy Markets

Two months ago, Prime Minister Narendra Modi formally inaugurated the onshore gas production facilities of Oil and Natural Gas Corporation (ONGC)’s Cluster-2 deep-water field off the Andhra Pradesh coast, from exploration block KG-DWN-98/2 in the Krishna-Godavari (KG) sedimentary basin.

At the time, the only significance the headlines projected to this milestone was that ONGC had finally commenced monetisation of its first deep-water asset in the KG basin.

The production volumes forecasted for the block were substantial — 16 million cubic metres and 80,000 barrels of oil a day at the peak.

The moment was a long time coming for a block awarded to ONGC over two decades ago. In that period, ONGC’s joy at making sizable discoveries was dampened by delays, arbitration, litigation, policy changes, fluctuation in prices, which affected the project’s economics, and technological challenges.

But the true significance of this recent commencement of production from Cluster-2 becomes clearer only when we link it to two other developments.

The new year got some extra-good cheer through news reports that ONGC had started commercial production of oil and gas from Cluster-7 in the Mumbai Offshore basin on 29 December 2022. 

And that was followed by the news that Shapoorji Pallonji’s Floating Production Storage and Offloading Unit (FPSU) had hooked up at ONGC’s KG-DWN-98/2 in the KG basin on 28 December 2022.

Connecting the dots, we see that the Government of India, the Ministry of Petroleum and Natural Gas (MoPNG), and ONGC have been working in aggressive concert over the past year to increase domestic hydrocarbon production, to mitigate to the extent possible upheavals in global energy markets caused by the West’s proxy war in Ukraine and its sanctioning of Russia.

The details tell an interesting story.

Cluster-7 in the Arabian Sea was discovered by ONGC many decades ago. It was not exploited because the asset was deemed marginal in nature, as a result of which the project was highly sensitive to pricing.

Around two decades ago, Cluster-7, along with similar marginal clusters in the region, was offered under a service contract model by ONGC for development by private parties.

Nothing really came of it. But, in 2011, it was decided that Sagar Samrat, ONGC’s legendary offshore drilling rig, which developed Bombay High in the 1970s, would be converted into a mobile offshore production unit (MOPU).

Accordingly, a contract to convert the rig was awarded to a consortium of Mercator Oil & Gas Limited Mumbai, Mercator Offshore, Singapore, and Gulf Piping Company, Abu Dhabi, on 17 November 2011.

It was a good idea, but the project languished at a dock in Abu Dhabi for years. It was finally terminated for non-performance in 2018. More time was wasted as ONGC had to settle commercial disputes across multiple foreign jurisdictions.

Then, in November 2021, just as tensions were rising over Ukraine, the Indian foreign ministry got into the act. 

Whips were cracked, the pending work on Sagar Samrat was completed at breakneck speed, and, believe it or not, it reached Jamnagar from Abu Dhabi on 22 March 2022. 

By 14 April, it was on site at Cluster-7, ready to be tied in to the wells sitting on the seabed.

The old contractors were demobilised; new, Indian ones were hired; hooking up and testing was completed without further delay, and that is how first oil could be produced from Cluster-7 on 29 December 2022.

The same approach was adopted towards the Shapoorji Pallonji FPSO in the KG basin — get the job done without delays.

By this writer’s professional understanding of the two ONGC assets — Cluster-7 and KG-DWN-98/2 — we can expect an addition of around 50,000 barrels of crude oil a day in this calendar year.

That is not a small sum, and readers need not be surprised if these production levels are exceeded by the end of the year.

As a result, even as the Indian government recasts its oil and gas import plans, with Russia now the largest supplier of oil to India, ONGC’s production from offshore marginal fields discovered long ago will provide invaluable elbow room to planners in the Indian Petroleum Ministry as they navigate the ongoing ruptures in the global energy sector.

This is how governments should function in times of crisis — swiftly, with purpose, and for the public good.