ONGC to start commercial oil production from KG block in May 2024: Minister

State-controlled Oil and Natural Gas Corporation (ONGC) will in May next year start commercial production of crude oil from its much-delayed flagship deepsea project in Krishna Godavari basin, the Rajya Sabha was informed on Monday.

In a written reply to a question, Minister of State for Petroleum and Natural Gas Rameswar Teli said ONGC's KG basin project, KG-DWN-98/2, is in "challenging geology".

Delays have occurred due to multiple challenges and issues in actual project implementation such as subsurface geological issues, shifting of well locations and surface facilities/processing platform, delays and disruption in project supply chain for vendors spread across multiple countries due to Covid-19 pandemic and challenging weather conditions.

The KG-DWN-98/2 or KG-D5 block, which sits next to Reliance Industries' KG-D6 block in the KG basin, has a number of discoveries that have been clubbed into clusters. Located 35 kilometres off the coast of Andhra Pradesh in water depths ranging from 300-3,200 metres, the discoveries in the block are divided into Cluster-1, 2 and 3. Cluster 2 is being put to production first.

"Cluster-I consists of three discoveries. FDPs of 2 discoveries were approved in 2019. This project is currently in the development stage," he said. "In Cluster-II, commercial production from one gas field has already commenced from March 2020 and commercial production of crude oil is scheduled for May 2024. The project is likely to achieve full completion by 2024."

In Cluster-III, there is one ultra-deep water gas discovery which would be the second deepest hydrocarbon discovery in the world, when monetised. "The FDP is scheduled to be submitted by January 2026," he said.

As per original plans, oil production from Cluster-II should have begun by November 2021, but was delayed because of the pandemic. Thereafter, ONGC set May 2023 as the first Cluster-2 oil production deadline but then extended it to August 2023, then to September 2023, and finally, October 2023.

None of the deadlines were met and last month ONGC Director (Production) Pankaj Kumar had stated that oil production would start within November but the company is yet to give an update on it.

Teli said after the discoveries are made in any block, operators are required to submit a field development plan (FDP) for approval by the Directorate General of Hydrocarbons (DGH). "Thereafter, the operator commences production facility development followed by testing and commercial production," he added.

ONGC had proposed a FDP for Cluster-II in April 2018, with an estimated capital expenditure of USD 5.07 billion and operational expenditure of USD 5.12 billion over a field life of 16 years.

The Cluster-II field is divided into two blocks namely 2A and 2B, which as per the original investment decision were expected to produce 23.52 million metric tonnes of oil and 50.70 billion cubic metres (bcm) of gas over the life of the field.

Cluster 2A was estimated to contain reserves of 94.26 million tonnes of crude oil and 21.75 bcm of associated gas, while Cluster 2B is estimated to host 51.98 bcm of gas reserves.

Cluster 2A was anticipated to produce 77,305 barrels of oil per day (bopd) and associated gas at a rate of 3.81 million metric standard cubic metres per day (mmscmd) over 15 years.

Cluster 2B is expected to produce free gas of 12.75 mmscmd from eight wells and has a 16-year life.

But ONGC is projecting a lower output - 45,000 bpd of oil and up to 2.5 mmscmd from Cluster 2A and around 9 mmscmd from Cluster 2B.