ONGC to spend $ 1.3 bn to maintain output at aging fields

Oil & Natural Gas Corp. (ONGC), India's largest energy explorer, plans to spend rupees 66 bn ($ 1.3 bn) this year to maintain output from aging fields.
The producer wants to sustain output levels in areas off the nation's west coast, including Bassein, which supplies 33 % of India's current gas output, Sudhir Vasudeva, director of offshore operations, said.

Maintaining production is key for ONGC, which hasn't been able to produce oil or gas from any of the 105 fields it won in India's exploration auctions since 1999. The decline in crude prices has forced the explorer to hold off on increasing output at the overseas fields acquired last year.
"ONGC has been spending a lot to maintain production but the worry is that they have not discovered any big new fields for a long time," said Deepak Pareek, an analyst at Mumbai- based Angel Broking.

The Mumbai High fields, 160 km (100 miles) northwest of Mumbai in the Arabian Sea, were discovered in 1974 and have recoverable oil reserves of around 1,300 mm tons, Vasudeva said. That's about 10 times India's consumption of 128.5 mm tons in 2007, according to the BP Statistical Review of World Energy.
"The bulk of the spending in the western offshore area will be on Mumbai High," Vasudeva said. "We are a cash-rich company and have no problems with liquidity."

Production targets
The explorer has extracted 19 % of the reserves and hopes to keep producing oil from the fields for another 30 years, recovering 40 % of the reserves, Vasudeva said. The country's oil production for the year ended March 31, 2008, rose 0.4 % to 34.12 mm tons, according to the oil ministry.
ONGC aims to produce 11.9 mm tons of crude from Mumbai High in the year that started April, 2.4 % more than the output of 11.62 mm tpy earlier, Vasudeva said.

"The technology they have and how good they are at managing their reservoirs will determine their success," said Pareek, the top-ranked analyst for ONGC. "Compared with global players, ONGC doesn't really havethe best technology for deepwater exploration and production."
ONGC shares have gained 27 % in Mumbai trading this year, compared with a 13 % increase in the benchmark Sensitive Index of the Bombay Stock Exchange and a 38 % advance for Reliance Industries, an explorer and refiner.

Reliance's output
Reliance, the first to start production from fields won in India's oil and gas field auctions, has said it plans to supply more than 40 % of India's fuel requirements by March 2010. Production will rise to 550,000 barrels of oil equivalent a day and boost the nation's output by 40 %, Reliance Chairman Mukesh Ambani said in September, when he announced the flow of oil from deep-water wells located in the Krishna-Godavari basin off India's east coast.
ONGC produced 76 % of the country's crude oil output and 68 % of its gas production in the 11 months to February, according to data provided by the Oil Ministry.

Crude oil in New York trading has tumbled 61 % over the past year as a global slowdown reduced demand. ONGC may produce less oil than planned this year from fields belonging to the UK's Imperial Energy Plc because prices are low, Chairman R.S. Sharma said March 26.
The explorer bid $ 2 bn for Imperial Energy, which has properties in Russia, when oil prices were more than $ 120 a barrel and completed the acquisition in March, when crude had tumbled to less than $ 50.
"We prefer to conserve the oil for when prices rise," Sharma said.