ONGC to invest $536 million in Mumbai High

Sept. 20, 2004
India's state-owned Oil & Natural Gas Corp. plans to invest 24.84 billion rupees ($536 million) in Mumbai High, its largest oil field, during the current fiscal year, which ends Mar. 31, 2005.

India's state-owned Oil & Natural Gas Corp. plans to invest 24.84 billion rupees ($536 million) in Mumbai High, its largest oil field, during the current fiscal year, which ends Mar. 31, 2005.

Although much of this investment is targeted towards continuing redevelopment to increase production from the aging asset off Mumbai, at least half the sum is being directed towards new projects.

Raha
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"We had launched a redevelopment program at Mumbai High in 2001, to increase our oil recovery, and planned total investments of 80 billion rupees," said ONGC Chairman and Managing Director Subir Raha, on the sidelines of the 11th Indian Oil & Gas symposium, in Mumbai Sept. 6.

"We hope to produce an additional 75 million tonnes of crude oil and oil-equivalent gas by 2030 through the redevelopment program from this, our largest field."

The efforts since the program's initiation have yielded an additional 50,000 tonnes of oil and oil-equivalent gas.

"This year, we will be investing money in laying the two Mumbai High-to-Uran trunk pipelines, which will be the largest of their kind in the Asia-Pacific region," said Raha.

The 28 billion rupee pipelines—261 km for oil and 246 km for gas—will link Mumbai High to Uran on the western coast, south of Mumbai city.

"We are also planning to invest 10.48 billion rupees on setting up nine [wellhead] platforms in Mumbai High (South)," he said. "Five of these platforms will be set up during the current year."

The company will increase production by 500,000 tonnes/year by 2006 , keeping crude production stable at the field, which had been experiencing a 5%/year decline in production.

ONGC also is targeting a 1 million tonne/year increase in production by 2007, the last year of its tenth 5-year plan. This, he clarified, would not include new discoveries.

Bid delays nixed

Raha strongly criticized service contractors that tried to sabotage projects by seeking "political intervention" at the time of contract awards.

"Some of these contractors have been working with ONGC for the last 30-40 years and have been putting a spoke in our wheels time and time again by applying political pressure," he claimed. "This has resulted in a lot of time loss while awarding tenders, often resulting in the loss of an entire working season. We will take stern action against such contractors in future."

The ONGC chairman said that the procedure for awarding contracts has been changed, and that most vendors have responded positively to the changes.

"Others who contribute repeatedly to violent ethics and try to make the management change the terms of the contracts are the most vociferous in complaining that we are slow in awarding contracts," he said. "We will, in future, take the extreme step of banning these contractors."

Speaking on the global crude production trend, Raha said that 50% of world production comes from medium-sized and small fields, with barely 20% coming from giant fields. He decried the excessive attention being paid in India to the large fields.

"It is time we paid equal respect to small fields and worked towards bringing idle small fields to production," he said. "We have decided to open up 93 marginal fields, and exploration in these will be carried out through service contracts."

Effects of oil shock

Raha said that current high global crude oil prices are distorting the way companies operate in the oil industry.

"The industry needs to be careful, since there is a lot of speculation on the movement of crude prices," he said. "The point to appreciate is that one third of the analysis on crude prices is pure speculation.

"Going by the oil shock of 1979 and crude prices at the time, the current price should be in the region of $79/bbl. But it hasn't gone to that level. I think oil companies need to rework their business plans in view of the uncertainty in crude oil prices."