A 4 1/2 year old joint venture of a Soviet agency and India's state oil company for exploration and development in India's Cauvery and North Cambay basins has been marred by inefficiency and rising costs from the start.
ONGC and the Soviet Union's Technoexport in May 1985 signed an agreement covering the $458 million Intensive Integrated Exploration Program (IIEP).
Long term Soviet credits were to be used to finance 70% of the costs of IIEP, which was to operate on a nonprofit, nonloss basis with India funding the balance.
However, the program has turned out to be increasingly expensive for India, and ONGC is insisting on cost reductions from the Soviet side.
COST COMPARISON
On the basis of data made available last month, finding costs associated with the Soviet venture in the two basins are three to four times that of ONGC and India's other state oil company, Oil India Ltd. (OIL). The gap widens more in comparison with private multinational companies.
The IIEP called for a complete E&D program in the two basins, to be complete by October 1995: seismic surveys, data processing and interpretation, exploratory drilling, and facilities design and development in the event of a discovery.
Plans called for a total of 72 wells-46 in Cauvery basin and 26 in North Cambay basin-for a combined footage of about 703,400 ft and 4,412 line miles of seismic surveys.
Technoexport has spent $4,862/ft of hole drilled in the North Cambay basin, compared with ONGC's costs of $1,711/ft in the same basin. In the Cauvery basin, Technoexport has spent $5,905/ft of hole drilled vs. $2,943/ft by ONGC.
For a seismic survey in Cauvery basin, Technoexport has spent $4,742/line mile compared with ONGC's $1,277/line mile. In North Cambay basin, Technoexport seismic survey costs have averaged $5,135/line mile, ONGC's $3,062/line mile.
The Soviets also have been plagued with poor drilling efficiency in India. In North Cambay basin, Technoexport drilled 1 S. Patan to 9,842 ft in 150 days. That compares with ONGC's efforts in the same basin near Gandhar, where it drilled two wells, each to about 10,500 ft, in a total of 82 days.
ONGC'S CONCERNS
ONGC originally did not want to part with any area in Cauvery and North Cambay basins, preferring instead that the Soviets start their joint venture E&D program in West Bengal, where drilling conditions are more complicated. The government overrode ONGC's objections, however.
After 4 years of complaints by the Indian side of the venture, the Soviets now recognize that cost cutting is inevitable.
During the last management committee meeting, held last September-October, ONGC again suggested the Soviets undertake specific cost cutting measures.
The Soviets, however, wanted a step by step approach and called for contract changes first. In addition, ONGC has asked for a 25% cut in Soviet manpower in the IIEP.
After prolonged negotiations, the two sides signed contract amendment agreements, which should pave the way for cost reductions.
Talks on that subject are to begin soon in Moscow.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.