Directorate slashes estimates of ONGC and GSPC discovery claims

Jun 21, 2007 02:00 AM

The Directorate General of Hydrocarbons (DGH) has sharply slashed the estimates of gas discoveries claimed by the Gujarat State Petroleum Corporation (GSPC) and ONGC, dealing a blow to their future plans and to India’s chances of becoming a gas-surplus nation by 2010.
The regulator, who plays a major role in certifying the discoveries made by oil and gas companies in India, has said ONGC’s recent find in block UD-1 in the Krishna-Godavari (KG) basin contains only 2.09 tcf of gas.

The company had estimated 20 tcf. Similarly, GSPC’s reserves in the same basin are only 1.8 tcf in KG-OS well in block KG-OSN-2001/3, against 20 tcf claimed by the company, the DGH has said in a recent report to the petroleum ministry. The move is sure to stun the two companies and provoke an angry reaction.
Both ONGC and GSPC are betting heavily on the discoveries for future growth. While ONGC sees this as a chance to refurbish its reputation as India’s premier oil and gas company, GSPC was hoping to use the find to secure international partners and emerge as a leading player. The DGH report now makes that task difficult.

“Our report to the petroleum ministry puts ONGC’s major gas find at 2.09 tcf and GSPC’s at 1.8 tcf. These companies have not yet undertaken further detailed appraisal of their discoveries in order to assess the exact reserves before development schemes are drawn up,” said a senior DGH official.
The drastic downward revision could also impact the petroleum ministry’s vision of making India gas surplus by 2009-10. As per the ministry’s projections, India will have a surplus of 16.95 mm cmpd that year which will fall to 5.02 mm cmpd in the next year.

Included in this projection are supplies from Reliance Industries (80 mm cmpd) and GSPC (54 mm cmpd). The downward revision in GSPC means that India could face a shortfall of 50 mm cmpd in 2010 which will be made up by imports.
“If DGH’s report is to be believed, this shortfall will lead to increase in gas pricing in the country. Besides,it’s a big setback for ONGC and GSPC. Almost all international players were in race to pick up stake in these blocks,” an analyst with an international research firm said.

But there is also another possibility. Rising production from Reliance Industries’ KG basin fields could help alleviate the shortfall to some extent. RIL is set to begin production of 80 mm cmpd of gas from 2008-09 based on its certified reserves of 11.3 tcf.
But the reserves are expected to rise based on estimates from its exploration partner Niko and as Reliance drills more wells. Only about 23 % of its KG-D6 block has been explored and Hardy Oil, the Ambani major’s partner in other blocks, has also talked of large gas reserves in place in these blocks. The question now is whether this increase in production would come in time for the shortfall to be met.

An industry expert said Reliance would be able to ramp up production once the basic infrastructure, such as offshore terminals and sub-sea pipelines, is in place.
“Reliancehas only explored a small portion of D6. As they explore more areas, the gas produced can be used to feed the already set-up system. They will need some extra facilities but that shouldn’t be a problem since most of the infrastructure is modular in nature,” he added.

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