News Brief
ONGC To Intensify Exploration With Rs 31,000 Crore Capital Expenditure In FY 2022-25
- The oil and gas major ONGC has drawn up a comprehensive roadmap to further intensify its exploration campaign.
- The plan includes activities funded through ONGC’s internal programme as well as funded and facilitated by the government.
ONGC.
Energy giant Maharatna Oil and Natural Gas Corporation (ONGC) is set to intensify its exploration activity with capital expenditure of about Rs 31,000 crore in the next three fiscal years during FY 2022-25. This is 150 per cent of its exploration expenditure of Rs 20,670 crore in the last three fiscals during FY 2019-22.
The company’s plans come in the backdrop of a continuous fall in India’s crude oil production due to inadequate output by domestic companies leading to a surge in the country’s oil import bill as global crude prices remain high in the wake of the Russia-Ukraine conflict.
The oil and gas major has drawn up a comprehensive roadmap to further intensify its exploration campaign which includes activities funded through ONGC’s internal programme as well as funded and facilitated by the government, the company said on Friday (27 May).
The internal programme has three components -- re-exploration of mature basins, consolidation of emerging basins and probing of emerging and new basins. Under this internal programme, ONGC is trying to probe around 1700 million tonne of oil and oil equivalent gas (MMTOE) of yet-to-find (YTF) reserves during FY 2022-25.
The company will undertake state-of-the-art 2D and 3D seismic survey, followed by drilling of around 115-120 wells with an estimated outlay of Rs 10,000 crore every year for next three years. Besides, the government’s facilitation has resulted in release of about 96,000 sq. km area so far, which was earlier demarcated as ‘No Go’ zone. This will further help ONGC achieve its acreage acquisition program of bringing around 5,00,000 sq. km under active exploration by 2025.
The government funded programme entails mandate for appraisal of unapprised offshore areas till exclusive economic zone (EEZ), 70,000 line kilometre (LKM) of state-of-the-art 2D broadband seismic data acquisition and processing and interpretation (API). All this will be done in three sectors namely west coast of India, east coast of India and Andaman offshore. The company will complete the technical bid opening for seismic data acquisition by June 2022.
In Andaman Basin, ONGC presently holds two blocks for exploration under open acreage licensing policy (OALP). The government has also acquired seismic data in some sectors within ‘no-go’ areas and few prospects are already identified.
The other plan of ONGC is to drill six wells in the next three years which includes two under ONGC committed work programme and four through government funding. Reputed global companies/consultants are being invited for the assessment of the basin for future exploration and exploitation plan.
According to Fitch Ratings, the 110 per cent increase in natural gas prices by the government, along with a recent revision in the rating firm’s Brent crude oil price assumptions to $100/barrel 2022, from $70 earlier, and $80 in 2023, from $60 previously, will boost the profitability of rated Indian upstream companies and support their investment spending. The price for gas from fields that were assigned by the state to oil companies, mainly ONGC and Oil India was increased to $6.1 per million British thermal units (mmBtu) for April-September 2022 from $2.9 per mmBtu in October 2021-March 2022.
With the government also increasing the price ceiling for gas produced from deepwater and other difficult fields to $9.9 per mmBtu from $6.1 per mmBtu, ONGC’s gas production from the KG basin will benefit from the increase in the price ceiling. However, as Fitch Ratings points out, the impact on their financial profiles is minimal, given the limited contribution to total revenue.
Equinor is the leading operator on the Norwegian continental shelf, present in around 30 countries worldwide and the Memorandum of Understanding was signed during the visit of a high-level delegation of Norway to India.
Also in line with ONGC’s ambitious exploration plans, are two projects worth more than Rs 6,000 crores which have been commissioned recently at Western offshore which will result in an incremental gain of 7.5 MMT of oil and more than 1 BCM of gas.
A Rs 3,740-crore spend has been made on a state-of-the-art 8-legged water injection-cum-living quarter platform, as part of the Mumbai High South Redevelopment Phase-IV, which involves reducing the salinity of the injected sea water with a desalination plant and comes under the government’s initiatives of Enhanced Recovery Policy 2018 for oil and gas.
The project will result in incremental gain of 3.20 MMT of oil and 0.571 BCM of gas. The project has been implemented with emphasis on local procurement of Rs 1700 crore, in line with ‘Make in India’ initiative. Out of total 45 major pumps/packages in the NWIS project, 42 packages have been manufactured in India.
Another, the cluster 8 marginal field development project at Mumbai High has been implemented with a total cost of Rs 2,292.46 crore and will result in incremental production of 4.38 MMT of oil and 0.464 BCM of gas. These marginal fields were discovered in 2017-18 and 2018-19. A carbon mitigation system has been implemented for the first time in offshore as part of the project.
As also India’s first E&P company to trade domestic gas on Indian Gas Exchange, ONGC's first online trade has taken place on 23 May this year on the country’s first automated national level Gas Exchange. The gas traded is from ONGC Krishna Godavari 98/2 block.
After the deregulation in gas pricing ecosystem in 2000-21, ONGC has prepared itself to reap the benefits. The quantity sold by ONGC through the Gas Exchange will be enhanced slowly.
