ONGC to invest Rs 35,000 crore

State-owned oil explorer ONGC board on Monday approved an investment of Rs 34,000 crore — the highest ever by the PSU oil explorer — to develop Krishna-Godavari basin deep water KG-DWN 98/2 block’s cluster 2. The block is divided into three clusters: 1, 2 and 3.

The Cluster 2 is projected to produce a total of 23.5 million tonnes (MT) of oil and 50.7 billion cubic metre of gas over the life of the field. It is expected to hit net peak production of 77,000 barrels per day (bpd) of crude oil and 16.29 million metric standard cubic metres per day (mmscmd) of gas by 2021-22.

The peak daily production rate from the Cluster 2 works out to 16.89 per cent and 27.60 per cent of ONGC’s current production rate of crude oil and natural gas respectively.

“First gas production is envisaged by June 2019 and oil would start flowing from March 2020,” ONGC chairman and managing director D.K. Sarraf said after the board meeting.

The decision comes days after the Narendra Modi government allowed producers to claim a higher price for gas extracted from hydrocarbon basins located in the deep water and ultra-deep water areas of India, where development costs can be significantly higher. ONGC will have marketing and pricing freedom for the gas.

The increased production will help in increasing the company’s profit after tax by $585 million by fiscal 2021.

KG-DWN 98/2 (KG-D5 bl-ock) has been divided into three clusters 1,2 and 3.

ONGC is in dispute with Reliance Industries Ltd on Cluster 1, where the state- owned company alleged that Reliance Industries has extracted its gas.

In December, the petroleum ministry had set up a one-man committee of Justice (Retd) A.P. Shah to look into “acts of omissi-on and commission” over allegations that Rs 11,000 crore gas had migrated from ONGC block to adjoining KG-D6 block of Mukesh Ambani’s Reliance Industries.

Cluster 2 has been divided into two parts: 2A and 2B. Cluster 2A has estimated in-place reserves of 94.26 million tonnes of crude oil and 21.75 billion cubic meters of associated gas. Cluster 2B has estimated in-place reserves of free gas of 51.98 BCM.