Success, at last

The Iran find ends a 33-year drought for the oil major

A few months ago, Oil and Natural Gas Corporation (ONGC), the country's largest exploration and production company, was on the verge of being denied the deepwater exploration blocks it had bid for in the sixth round of auctions (NELP VI). The upstream regulator, the Directorate General of Hydrocarbons (DGH), had recommended the move citing the company's "poor" strike rate in such blocks.

The DGH recommendations were not accepted by the government, which chose to back the company that had given India its largest crude oil find in 1974, christened Bombay High. The company is now "� gradually "� delivering on its promise of discovering and securing more oil and gas for an energy-hungry India.

Last week, ONGC announced that its wholly-owned subsidiary and overseas investment arm, ONGC Videsh Ltd (OVL), had discovered both oil and gas in a block off the shores of Iran. Initial reports pegged the oil reserves at over a billion barrels and gas at 10 trillion cubic feet (tcf). 
 

THE STRIKE RATE
Company	Location
OVL-GAIL	Myanmar -2004
OVL	Egypt -2006
OVL	Iran -2006
ONGC	K-G basin -2006
RIL	K-G basin -2002
GSPC	K-G basin -2003
RIL	Mahanadi basin-2004
RIL	Yemen -2003
ONGC	Mahanadi basin-2006
Cairn	Rajasthan -2004
Cairn	Ravva -1998

OVL Managing Director RS Butola says that it is still too early to put a figure to the reserves. But insiders aver that the reserves are "huge". At 10 tcf of gas, this could be the largest reserve that an Indian company owns outside the country. Moreover, the block is held entirely by Indian companies, with

OVL and Indian Oil Corporation holding 40 per cent stake each and Oil India 20 per cent.

The Sakhalin-I field, in which OVL holds 20 per cent stake, has reserves of around 2 tcf, while in Myanmar, where OVL and GAIL together hold 30 per cent in two blocks, is estimated to holds around 3.5 tcf of gas.

Said an ONGC executive: "Combined with our gas discoveries in the Krishna-Godavari and Mahanadi basins, it quells the criticism that we do not have expertise in offshore drilling."

Bombay High is India's largest offshore oil field. Situated around 161 km north of the Mumbai coast, it produces 14 per cent of the country's oil requirements and accounts for 38 per cent of all domestic production.

The Farsi block find in Iran may also absolve the company of charges of a below-global-standards recovery rate of crude oil.

Industry watchers however point out that most of ONGC's discoveries continue to be probable reserves, and not proven. "Look at the Mahandi and the K-G basin discoveries. The company still has not been able to put figures to the reserves," said a Mumbai-based analyst.

Bombay High continues to be the largest producer of crude oil, even after 30 years of its discovery. "There have been no other significant oil discoveries. Cairn came and discovered oil in Rajasthan. Reliance has been consistently discovering gas," said an analyst with KPMG.

ONGCians argue otherwise. "We have made 22 oil and gas discoveries in the last financial year alone. Of this, nine are new ones," said an ONGC director who did not want to be named.

The gas discovery in the Krishna-Godavari basin, touted as India's North Sea, is the first ultra-deepwater discovery in the country. The company's gas strike in the Mahanadi basin off the coast of Orissa is also the first in the region. Reliance Industries and GAIL have since made other gas discoveries in the region.

During the financial year, ONGC, which has the second largest market capitalisation of oil companies in the country, increased its oil and gas reserves by 65.56 million tones of oil and oil equivalent gas (mtoe), which is above the target of 52.5 mtoe.

"Don't these statistics tell the entire story?" asks an ONGC board member.