ONGC finds major crude reservoir in Mumbai High

May 15, 2015 12:00 AM

Oil and Natural Gas Corp. Ltd (ONGC) has discovered a substantial reserve of crude oil between its Mumbai High north and south fields in the Arabian Sea, oil minister Dharmendra Pradhan said.

Pradhan, who spoke to the media in Mumbai after visiting the western offshore facilities of India’s largest oil explorer and producer, did not share details of the discovery.

The new find, which comes almost 50 years after ONGC began production in Mumbai High, will help the company maintain production levels from the basin for a longer time than currently estimated, said the minister.

The Mumbai High basin is ONGC’s flagship oil producing asset. Along with the other smaller fields along the western offshore, the asset currently produces 16 million tonnes per annum (mtpa) of crude oil, which is nearly 40% of India’s total crude oil production of 37 mtpa.

However, since the fields are almost 50 years old, ONGC has been struggling to maintain production at current levels. After remaining more or less constant for 10 years, the production rose in 2014-15.

“The new discovery of the reservoir will help us maintain the plateau and take production beyond 20 mtpa by 2020,” an ONGC executive said on condition of anonymity.

Pradhan, who completes a year as oil minister in May, said his ministry is working on a long-term plan to reduce oil imports and ensure future energy needs. The government has set a target of reducing India’s oil imports by 10% by 2022.

“We are exploring opportunities to increase domestic production and also acquisitions globally to meet the plan,” said Pradhan.

In the year ended 31 March, India imported 189.43 million tonnes of crude oil, or 83% of the total consumed. The government paid $112 billion for this, which accounted for 27.9% of India’s imports last fiscal year, according to oil ministry’s statistical body Petroleum Planning and Analysis Cell (PPAC).

One of the options being considered is acquisition in the Middle East. Pradhan said the ministry is actively looking at opportunities in the region through ONGC Videsh Ltd, the overseas subsidiary of ONGC and Oil India Ltd.

ONGC Videsh has been scouting for assets in Latin America and the Middle East ever since crude oil prices started to plunge, but no deals have been concluded, an investment banker with a foreign bank said.

“To meet the energy security target of the government, we believe ONGC Videsh will have to spend at least a billion dollar each year in acquiring developing or producing assets,” the banker said, requesting anonymity.

Besides this, the government is also working to ease the policy framework for future production-sharing contracts so that the proposed tenth round of auctions under the new exploration licensing policy (Nelp) is a success. “We might announce the 10th Nelp round by the end of the current year,” said Pradhan.

Although the government’s efforts towards greater energy security are encouraging, not much has changed on the ground, experts say.

“While streamlining policies for domestic exploration is important, one has to understand that India’s hydrocarbon reserves are not sufficient to meet the growing demand,” an executive from an international consultancy said on condition of anonymity. “But India has been quite slow on the front.”

Separately, the minister said India expects to fill up its strategic petroleum reserve at Vishakhapatnam by the end of May. Work has begun on the second phase of expansion of the reserve.

India is building three sites for its strategic petroleum reserve, underground caverns that can store crude oil to be used in times of emergency. These are located at Vishakhapatnam, Mangalore and Padur with a total capacity of 5 mtpa. The crude store will be sufficient to meet the country’s oil demand for at least 13 days.

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