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An expansion of discoveries in the KG-D5 block (KG for the Krishna-Godavari basin), higher volume considerations, and an expected delay in the development of Cluster 1 discoveries - all these have prompted Oil and Natural Gas Corporation (ONGC) to shun an earlier plan to use Reliance Industries Ltd (RIL)'s infrastructure in the adjoining KG-D6 block off the coast of Andhra Pradesh.
ONGC had signed a memorandum of understanding (MoU) with RIL in 2013 to share the latter's infrastructure on the east coast. For the state-owned company, the idea was to speed up the development of D, E, and G-4 fields in Cluster 1 - north of the KG-D5 block and close to the boundary with RIL's KG-D6 block - to produce six to nine million standard cubic metres per day (mscmd) of gas by mid-2017.
However, the plan makes little sense now because, over two years, ONGC has gone ahead with multiple discoveries as part of the development of Cluster 2, farther away from the periphery of the KG-D6 block. The explorer is also setting up its own evacuation installation of a larger capacity near its discoveries in the region.
The KG-D5 block is divided into the northern and southern discovery areas. The northern area is further divided into Cluster 1 and Cluster 2 from top to bottom.
For the KG-D5 block, ONGC has been locked in litigation with RIL since May 2014. ONGC said that RIL had stolen gas from its KG-D5 block.
"When the MoU was signed in 2013, the prospecting area for KG-DWN-98/2 was not completely mapped and the focus was on a few very close discoveries connected to RIL's KG-D6 for evacuation of limited resources, which were geographically nearer to RIL's onshore facility. But, the field grew larger as it developed and we have ended up having more discoveries in Cluster 2 further south of the northern discovery area," an ONGC executive told the Business Standard. "Besides, now we have our own installation planned to cater to the additional fields in the south called Vashishtha and S1, which will come up before Cluster 2 fields," he added.
The company now plans to develop the entire region as an exploration hub, similar to its facilities in the western offshore region, with a major onshore terminal receiving gas from all the discoveries.
Asked whether the plan to develop own infrastructure would raise the capital expenditure, the executive said: "No point in additional investment because the volume of gas that will be produced by us will be much higher than what can be accommodated according to the 2013 plan. We will start producing in 2018 and reach 20 mscmd of gas and 80,000 barrels of oil by 2021. So, we want our complete and larger facility. The construction of the pipeline infrastructure will begin in 2016."
The company is in the final stages of preparation of the field development plan (FDP) for Cluster 2 discoveries and has not mentioned any intention to share infrastructure with RIL because it wants to connect all of its discoveries to its own terminal through its own transport pipeline. The FDP would be given to the directorate general of hydrocarbons for approval, after it is cleared by the ONGC board.
