State-owned ONGC may invest about $5 billion in its KG basin block KG DWN 98/2 to produce 17 million cubic meters per day (mcmd) of gas and 75,000 barrels per day (bpd) of oil by 2019 fiscal, a top official said.
“With the new gas pricing model, the discovery had become more viable for production. The investment decision will be taken in next couple of weeks,” ONGC Chairman Dinesh Sarraf said on Saturday.
The announcement comes within days of the government freeing up natural gas pricing.
This fresh investment in developing the KG DWN 98/2, with reserves of 70 billion cubic meters (bcm) of gas and 23 million tonnes of oil will be over and above the capital expenditure of Rs. 30,000 crore for FY17.
KG DWN 98/2 is next to the famous KG D6 block, owned by Mukesh Ambani-led Reliance Industries Limited (RIL), which reportedly pumped $1.4 billion worth of gas from ONGC’s field.
ONGC has taken the decision to develop the block itself without any foreign partners.
When asked if ONGC will partner any global major in developing the deepwater block, Mr.Saraff told The Hindu : “Going by the confidence shown by the ONGC team, we have decided to develop the block on our own. All the technical expertise and project management consultants (PMC) are available in the market.”
Earlier, ONGC partnered global oil majors of the likes of Norway’s StatOil, Brazil’s Petrobras and Chevron Corp. of U.S. to develop the block but they all walked away due to delays and bureaucratic hurdles.
While ONGC has announced its investment plans to develop its deepwater block in KG basin, other players like (RIL), Gujarat State Petroleum Corporation (GSPC) and Cairn India are likely to follow the suit as government’s reform decisions in the hydrocarbon sector to move towards a transparent market economy are expected to unlock significant investments of close to $30-$40 billion in the exploration sector alone, according to industry body CII.
“This is amongst the most important structural reforms in the sector as a policy of marketing and pricing freedom will expedite investments in the sector leading to the immediate development of discovered gas resources thereby resulting in a sharp increase in domestic gas production in next few years. PSC extension policy announced for discovered fields also bring clarity and will lead to considerable investment in these matured fields,” said Sashi Mukundan, country head for BP India and Chairman, CII National Committee on Hydrocarbons.
