India’s state-backed Oil & Natural Gas Corporation (ONGC) is set to boost deep-water gas production from the Krishna Godavari (KG) basin to between 2.5 million and 3 million cubic meters per day (cm/d) by May this year.
India’s largest oil producer last year began gas production from the $5.07 billion KG-DWN-98/2 project in the KG basin, off the east coast of India. It is expected to hit peak output around 2023-24.
“Gas production from Cluster-II has started as it is currently producing 320,000 standard cubic meters per day. May onwards, it will ramp up to 2.5-3 mmscmd,” ONGC told investors earlier this week.
Output in the fiscal year starting April 2021 is projected to average 3.4 million cm/d and 8.5 million cm/d in the following year.
“We are cautious in committing to any targets but 2023 or 2024 is a likely scenario for peak production,” said ONGC.
The national oil company (NOC) is investing $5.07 billion to bring a handful of discoveries to production in its deep-water KG acreage. Its block sits next to the KG-D6 discovery area of Reliance Industries and BP.
Analysts have warned that India’s new deep-water gas supply, including future production from BP and Reliance Industries’ KG-D6 Block, could face competition from rising LNG imports.
Deep-water developments are projected to drive the expansion of India’s gas production by adding over 1 billion cubic feet per day of new supply by 2023.
ONGC’s project will pump around 25 million tonnes of oil and 45 billion cubic meters of gas with peak production of 78,000 barrels per day of oil and 15 million cm/d.
ONGC started gas production from the project on time in early 2020. However, the start of oil production has been delayed due to the COVID pandemic, which disrupted global supply chains, reported the NOC. ONGC is waiting to mobilise an FPSO to start pumping oil.
The KG-DWN-98/2 development involves drilling and completing 34 subsea wells, laying about 425 km of pipeline and 150 km of control umbilical in water depths varying from 300 to 1,400 meters.
On prices, ONGC reported its breakeven cost for oil production at $50 per barrel and $3.50-3.70 per million British thermal unit (mmBtu) for gas. The company is paid international rates for oil. However, the government fixes the price for natural gas. The gas price for six months to March 31 is $1.79 per mmBtu. ONGC said gas prices are at a record low and the company makes losses on the gas business.
Meanwhile, in response to the government’s recent natural gas marketing reform, ONGC has approved the formation of a 100% subsidiary focusing on the gas and LNG business value chain. This offshoot could be used to bid for and buy gas from its own gas fields. As a strategic investment, ONGC will be acquiring a 5% equity stake in India Gas Exchange (IGX). Earlier, GAIL also acquired a 5% equity stake in IGX.