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A delay in procuring exploration equipment may push back state-run Oil and Natural Gas Corp. Ltd’s (ONGC) plans to produce gas from its Krishna Godavari (KG) 98/2 block starting June 2019, two industry officials said.
In the last week of August, ONGC re-issued its tender to hire a floating production storage and offloading (FPSO) unit, the officials said on condition of anonymity. An FPSO is a floating vessel used by the offshore oil and gas industry for producing, processing and storing hydrocarbons.
“Pre-qualification deadline to supply large floater for KG-DWN-98/2 deep-water project has been delayed. It would be difficult for ONGC to meet its June 2019 deadline,” said one of the two people cited above from an international engineering, procurement and construction company which is bidding for ONGC’s tenders.
ONGC plans to invest up to Rs65,000 crore ($10 billion) in three of its deep water blocks in the KG basin. The company has divided the block KG-DWN-98/2, into three clusters which would entail an overall investment of $9-10 billion.
Cluster II will see an investment of about $5.1 billion and was scheduled to produce its first gas by June 2019 and oil by March 2020. The company is expecting peak output of 17 million standard cu. m of gas per day and 77,305 barrels of oil a day from here.
“Implementation of goods and services tax (GST) has impacted the issuing of our tenders, but we have sorted it out now. Having said that, one has to understand that projects of such nature do take time and if it gets delayed by a few weeks or months, it is not something to be worried about,” said an ONGC official on condition of anonymity, as he is not allowed to talk to the media.
ONGC did not reply to an email sent on 7 September. ONGC also plans to connect the assets of Gujarat State Petroleum Corp. Ltd (GSPC) Ltd to this cluster. Last month, ONGC had completed the Rs7,738 crore acquisition of an 80% stake in GSPC’s Deen Dayal West (DDW) gas field in KG-OSN-2001/3 block.
“The state-run oil companies call for tenders but the closing of the tenders take a very long time. They seek tenders and then cancel it and then again call for tenders. This not only wastes their time but ours too,” the industry official cited above said.
ONGC aims to double its gas production in the next five-to-six years and KG basin production would help the company in this endeavour. ONGC currently produces around 23 billion cu. m (bcm) of gas a year, which is expected to go up to 29-30 bcm in four years.
However, gas production at some fields is projected to drop to 11.8 bcm in four years from the current 19.73 bcm. ONGC plans to invest around $11 billion to increase gas production by nearly 30% over the next three-four years.
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