ONGC strikes gas in K-G, Mahanadi basins

Oil & Natural Gas Corporation, the country's biggest oil explorer, has made "major" gas discoveries off the eastern coast, Petroleum Minister Murli Deora said.

The finds in the Krishna Godavari and Mahanadi basins may yield "substantial gas", ONGC Chairman R S Sharma told reporters. Reserves estimates will be announced within 15-20, he said. ONGC shares rose as much as 4.6 per cent after the announcement.

The state-run company is seeking to boost output and offset declining reserves at aging fields such as Bombay High.

Director General of Hydrocarbons V K Sibal has criticised ONGC for failing to make discoveries in the 47 drilling areas it won out of a total 108 awarded by the government since bidding for fields was opened to international explorers six years ago.

"The finds are good news for India,'' said Claudio Bernasconi, who helps manage $42 million of Indian stocks, including ONGC at Banque Cantonale Vaudoise in Lausanne, Switzerland. "The finds will help India become a country with major gas reserves."

Shares of Oil & Natural Gas rose Rs 22.3, or 2.5 per cent, to close at Rs 916.85 on the Bombay Stock Exchange.

The drilling area covering the discovery in the KG basin was acquired by ONGC from Cairn Energy, which won the block under the nation's first international offer of drilling areas in 2000, said ONGC's Offshore Director N K Mitra.

The Mahanadi find is in an area acquired by ONGC before 2000 when the company had a monopoly on drilling, he said. The company will drill more exploration wells in water depths of about 2,400 meters in the KG basin, Sharma said. The wells will extend as much as 7,000 meters below sea level.

The company has so far drilled up to 6,600 m below the surface. As many as six more wells will be drilled before the company makes a "formal" announcement about expected reserves, he said.

Reserves in the new find in the KG Basin in the Bay of Bengal may total 21 trillion cubic feet, compared with previous discoveries in the area totaling as much as 3 trillion cubic feet, the Press Trust of India reported on December 17, citing company sources.

The company also found as much as 4 trillion cubic feet of gas in the Mahanadi basin off the coast of Orissa, the news agency said.

ONGC is in discussions with Brazil's Petroleo Brasileiro SA, Eni SpA, Norsk Hydro ASA, BG Group Plc and BP Plc about possible partnerships for its new finds, Sharma said.

The Indian explorer is seeking partnerships in these areas because it doesn't have the technology to drill in water depths of more than 1,000 meters, he said.

"We don't have expertise in deep waters,'' Sharma said. "So to start production from the KG basin that is in deep waters, we may rope in a foreign partner." ONGC may sell a 10 per cent stake to the partner, he said.

India's gas supplies of 85 million cubic meters a day, including imported liquefied natural gas, fall short of potential demand of 170 million cubic meters, according to estimates by the petroleum ministry.

ONGC is targeting deepwater exploration to increase output and reduce the nation's reliance on overseas oil purchases. India, Asia's third-biggest oil consumer, imports three-quarters of its oil requirements.