ONGC roping in Statoil-Hydro, Petrobras to exploit Krishna-Godavari gas reserves

Mumbai: Oil & Natural Gas Corporation, the Indian public sector oil and gas exploration company, will begin producing gas from its fields in the Krishna-Godavari basin only by the financial year 2012-13. The company says it has over 6 trillion cubic feet of gas reserves in these fields, located on India''s east coast.

ONGC is signing up StatoilHydro of Norway and Brazil''s Petrobras as partners to help it develop its K-G reserves. The Norwegian company is said to be interested in taking a 20 per cent interest in the KG-DWN-98/2 block, and the Brazilian company 30 per cent, which will leave ONGC with 40 per cent. Cairn India, the original acquirer of the rights to the block, which had sold 90 per cent to ONGC, will continue to retain 10 per cent.

According to ONGC chairman and managing director R S Sharma, the company will produce 25 million cubic metres of gas per day by 2012-13. It will incur capital expenditure of Rs.190 billion in 2008-09.

This is all in the future. For the present, the company''s performance is not exactly heartening. Thanks to the government''s policy to make its 74 per cent-owned oil & gas company hold prices down, ONGC realised just $50 a barrel from its crude sales in the quarter ended September, way below international levels during these days of soaring oil prices.

That doesn''t mean the company has been making losses. On the contrary, its sales values and profits have been rising despite stagnation or decline in volume sales. According to Sharma, ONGC earns cash profit of Rs 2,000 crore per month. The company has been accruing profits despite stagnation or decline in sales volumes in the past four years (see table below).

Year ended 31 March
2007
2006
2005
2004
Change between 2004 and 2007 (%)
Quantity sold (other than trading)
Crude oil (million tonnes)
24.42
22.45
24.09
23.94
2.01
Natural gas (million cu. m.)
20,306
20,500
20,644
21,103
-3.78
LPG (''000 tonnes)
1,033
1,084
1,086
1,161
-11.02
NGL/naphtha/ARN (''000 tonnes)
1,442
1,578
1,587
1,656
-12.92
Ethane/propane (''000 tonnes)
548
535
528
534
2.62
Superior kerosene oil (''000 tonnes)
156
176
177
218
-28.44
Quantity sold (trading)
Superior kerosene oil (''000 tonnes)
563
432
970
0
-41.96
HSD (''000 kl)
1,394
874
1,538
0
-9.36
Motor spirit (''000 kl)
121
110
262
0
-53.82
Income from operations (Rs. million)
590,575
494,397
472,454
329,270
79.36
Profit after tax (Rs. million)
156,429
144,308
129,830
86,644
80.54
Source: ONGC

Given the worldwide energy crunch, the government expects ONGC to step up production. But, given the age of its existing production sites, it would be unrealistic to expect more than marginal increases from these fields.

According to P K Johri, ONGC''s executive director and chief of offshore engineering services, the company is currently producing 250,000 barrels of oil per day from its Bombay High offshore oilfields. He expects this to reach 270,000-280,000 barrels per day. Two-thirds of ONGC''s operations are located off India''s western coast.

The company must depend on newer discoveries to augment production. According to Johri, ONGC has 13 projects valued at $2.5 billion in India''s western offshore region in the country, which will be completed by April 2008. Six new projects in the region, valued at $2 billion, are in the tendering stages, which Johri says are slated to be completed by April 2010. A further 11 new projects are at the approval stage, and scheduled for completion by 2011-12.