India’s state owned explorer, Oil and Natural Gas Corporation (ONGC) faces technological challenges to produce gas from its only ultra-deepwater discovery UD-1, in the Krishna-Godavari basin in its Bay of Bengal block KG-DWN-98/2 (KG-D5).

India’s upstream oil regulator, Directorate General of Hydrocarbons (DGH) has recently refused to review the commerciality of deepest gas discovery (UD-1) on grounds that developing the find poses technological challenges.

The nation’s first ultra-deepwater find UD-1, announced by ONGC in 2006, lies in water depth of 2,400 m to 3,200 m and ONGC is still unsuccessful at producing gas from such depths.

DGH has returned the proposal on the grounds that ONGC needs to come up with technical studies showing how it would flow the gas to the surface and the quantum of in-place reserve.

In its declaration, ONGC has said that it might process this gas through floating production unit and evacuate through pipeline. ONGC expects to soon submit a field development plan to the DGH.

To date, ONGC had focused on other discoveries in KG-D5, postponing the exploration of UD-1 because of the technological challenges, but the corporation is seeking suggests to solve the technological problems. Reports suggest that ONGC is in the process of appointing a consultant who will assist in developing the UD-1 discovery.

While providing details, ONGC has said that the major challenges were sub-zero temperatures and the water depths of 2,600m to 2,900 m. The corporation’s assessment suggests that the area Southern Discovery Area (SDA), compromising the UD-1 find, has a total in-place gas reserves of 80.8 Bcm.

The block KG-DWN-98/2 (KG-D5) was awarded to ONGC under the New Exploration Licensing Round (NELP) and is governed by a production-sharing contract, which clearly defines a timeline for each activity.

Time limit to commence production from UD-1 discovery is a cause of concern for the explorer, but getting extensions are normal for such difficult finds, however, they cannot be granted forever.

The block KG-DWN-98/2 was originally awarded to Cairn Energy in the first round of auction under NELP in April 2000. However, ONGC bought 90 per cent interest in the block from Cairn Energy India Ltd in 2005. Cairn subsequently relinquished its remaining 10 per cent interest in favour of ONGC.

Block KG-DWN-98/2 (KG-D5) comprising 7,294.6-sq-km has been broadly categorized into two areas called Northern Discovery Area (NDA) and Southern Discovery Area (SDA). The corporation says that NDA comprises 3,800 sq km, whereas SDA comrises 3,494 sq km.

The NDA has 11 oil and gas discoveries while SDA consists UD-1 discovery. These discoveries have been clubbed in three groups: Cluster-1, Cluster-II and Cluster-III.

It has been reported earlier that the gas discovery in Cluster-I will be brought to production together with G-4 find in a neighboring KG block at an investment of Rs 124 billion (US$1.90 billion). However, this is not being taken up currently because of a dispute with Reliance Industries Limited (RIL) over migration of gas from ONGC blocks. Cluster-1 sits next to the KG-D6 block of (RIL).

The board of ONGC in March, 2016 had approved an investment of Rs 340.12 billion (US$ 5.22 billion) for developing Cluster-II discoveries to flow natural gas from June 2019 and oil by March 2020. From Cluster-II, a peak oil output of 77,305 barrels per day is envisaged within two years of start of production. Gas output is slated to peak to 16.56 million standard cubic meters per day by end-2021.

Cluster-III is the UD-1 gas discovery in SDA in ultra-deepwater that poses technological challenges.

The initiatives of ONGC to seek experts advise to solve technological challenges to produce gas from the UD-1 discovery has yielded some result.

As many as 10 international offshore drilling contractors including Trans Ocean Inc. have offered best-in-class deep sea drilling rigs to ONGC for its KG-D5 gas field developments.

ONGC had floated a tender to charter hire two deep water drilling rigs and one anchor moored rig for bringing gas in Bay of Bengal block.

Transocean Offshore International Ventures Ltd offered Deepwater Millenium, Discoverer India and Discoverer Luanda deepwater rigs while Ensco Maritime Ltd. offered two of its rigs, Ensco 8500 and Ensco 8501.

Other bidders include Seadrill Orion Ltd, Drillship Kythnos Owners Inc, Dupont Maritime LLC, Dynamic Drilling & Services, Ensco Maritime Ltd, Queiroz Galvano Leo Gas, Universial Energy Resources Ind, Vantage International management Co and Japan Drilling Co.

ONGC, along with its overseas unit, ONGC Videsh Limited(OVL), and state controlled Oil India Limited (OIL), accounts for about 70% of the total oil produced in India, while the remaining 30% of oil production in the country come from private sector and joint venture companies.

The oil and gas sector, one of the core industries in the country, which contributes approximately 15% to the total gross domestic product (GDP), was approximately worth US$139.8 billion in 2015 and has tremendous growth potential.

In nine bid rounds to date, NELP (opened to private investment in 1999) has awarded 254 blocks to national, private, domestic, and foreign companies, generating US $25 billion of investments as of March 2015.

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