ONGC ramps up gas output

When ONGC acquired Gujarat government-owned GSPC’s then-languishing Deen Dayal-West (DDW) block in the Krishna Godawari basin in late 2016, apparently under a government directive, many thought it could add to the explorer’s portfolio of under-performing assets. However, encouraged by higher prices for difficult fields which these assets are entitled to, ONGC has ramped up production from the block — from practically nil at the time of the acquisition and just 0.5 million metric standard cubic metres per day (mscmd) during trial runs in early 2017, the block’s output has zoomed to the current level of around 2 mscmd, two company executives told FE.

Under a deal struck in December 2016, ONGC acquired GSPC’s 80% stake in DDW assets for $1.2 billion.

According to sources, gas is being taken out from the four wells that were dug by GSPC. While a 5th well dug will be hydro-fracked soon, rigs are being deployed to dig the 6th and the7th wells.

To make operations more efficient, an administrative unit has been set up at the site.

The company is expecting that once all the seven wells are operational, the production can easily reach 3 mscmd.

“A lot of our reserves are locked in HPHT (high pressure-high temperature) fields and if we succeed at GSPC fields then a lot of path will open up for us,” said one of the executives.

ONGC has been given an assurance by the Gujarat government that the national explorer will get at least $6/mmBtu for the gas from the DDW block in the first year of production. The assured price will see staggered increments every year — it will touch $6.9/mmBtu in the fifth year and remain at that level during the remaining life of the asset.

In case the government-determined gas prices are higher than that offered by the Gujarat government, ONGC will realise the higher price from the market. For the October 2018-March 2019, the price for gas discoveries deepwater, ultra deepwater and HPHT areas has been fixed at $7.67/mmBtu.

DDW’s recoverable asset, as per ONGC, is estimated at around 1 trillion cubic feet (tcf). GSPC had earlier claimed that its KG basin fields have at least 20 trillion cubic feet (tcf) of gas reserves. The oil industry and ONGC refuted these estimates. Later, the Comptroller and Auditor General of India slammed GSPC in a report and said that as per the approved filed development report, DDW block’s gas-in place is 1.9 tcf of which 1.06 tcf is recoverable.