Comment

Building synergy for energy security

“The discussions between the two companies are taking place on a purely commercial basis.” — PHOTO: REUTERS  

Of late there has been a lot said and written about the proposed acquisition of stake in Gujarat State Petroleum Corporation’s (GSPC) high temperature high pressure Krishna-Godavari (KG) block by the Oil and Natural Gas Corporation Limited (ONGC), ranging from accusing the Centre of forcing ONGC to go ahead with acquisition of stake, to comments about the non-viability of the proposition. This article will explain why there is no truth in these claims.

The proposed transaction

In his article, “ >A covert ‘surgical strike’,” (Oct.24, 2016), published in The Hindu, Rajya Sabha MP Jairam Ramesh says that “ONGC, that has a net worth of Rs.1.5 lakh crore, should buy GSPC, that has outstanding loans of Rs.20,000 crore”. The fact, however, is that the proposed transaction between ONGC and GSPC is limited only to the ‘acquisition of stake’ by ONGC into the latter’s KG offshore block, which in no way amounts to ONGC buying GSPC.

It has also been mentioned that GSPC’s claim regarding the initial reserve estimate was 20,000 tcf (trillion cubic feet) of gas in place. This is a thousand times more than the actual initial estimate of 20 tcf of “Gas Initially In Place” (GIIP) — an industry term which means an estimate of hydrocarbons resources which lie in the area under exploration. It is also an industry-wide and well-known fact that GIIP translates into resources upon appraisal of the explored area and then further into reserves upon commencement of development of the appraised area. These industry-wide well-known facts have been conveniently left out and the same has been decorated as a “tall” claim without letting the public know of the caveats attached to such estimates.

Be that as it may, it is also apt at this juncture to point out that the estimate of 20 tcf of GIIP pertained in any case to the entire KG block area comprising 1,850 sq.km out of which GSPC has only retained approximately 497 sq.km of area (approx. 26 per cent of the total area) and relinquished the rest of the area before 2009-10. Further, a field development plan also came to be approved in October 2009 for the Deen Dayal West (DDW) area of approximately only 17 sq.km (only 0.91 per cent of the total area or only 3.42 per cent of the retained area) where the Directorate General of Hydrocarbons (DGH) and Ministry of Petroleum and Natural Gas (MoPNG) has approved that the DDW area alone holds in place reserves of 1.952 tcf and 2P (proved plus probable) reserves of 1.0596 tcf. In addition to the DDW Area, the MoPNG in 2010 has also granted rights to GSPC to develop the DDW Extension area of about 20.5 sq.km holding GIIP of 2.8 tcf. Further, the DGH-MOPNG in January 2014 also approved an additional 8.3 tcf of gas for six other discoveries outside the DDW area. Therefore, as of today, close to 14 tcf of GIIP has been established.

It is well known that the geographical and geophysical conditions in the KG block have made it a technical challenge to explore and develop. Factors such as low porosity, low permeability, high pressure (in excess of 12,000 psi), high temperature (about 400º Celsius) and a tight reservoir at a depth of more than 4,000 metres make for geological complexities of the kind which has rarely been tackled earlier by any exploration and production (E&P) company in India.

It is a fact that GSPC has invested (and not wasted) a significant amount of money, time and effort in order to come up with the apt technology for the development of the block. But all this travail has borne fruit. To overcome low permeability, the GSPC has, in well no. 4, successfully carried out hydrofracking operations at a depth of more than 5,000 m — a feat achieved for the first time in India and almost unmatched in petroleum engineering in the world.

Coming back to ONGC’s acquisition of stake in GSPC’s KG block, the discussions between the two companies are taking place on a purely commercial basis. The objective being to achieve business synergy between the resources of ONGC and GSPC for achieving more domestic production of natural resources by carrying out further development of GSPC’s KG Block. ONGC also operates an adjoining block in the KG basin which is due for development where the technological breakthrough achieved by GSPC in its KG Block can be of immense help for expediting the development. Given the proximity of the location of the two blocks, it is also possible that the state-of-art production facilities which GSPC has successfully commissioned can also come handy in achieving early production from ONGC’s block in the KG basin.

Thus, the acquisition of stake by ONGC in GSPC’s KG block is meant for achieving synergy of securing energy security for India.

Head Corporate Communication, GSPC.

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Printable version | Nov 26, 2020 8:19:02 PM | https://www.thehindu.com/opinion/op-ed/Building-synergy-for-energy-security/article16082563.ece

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