India lowers Krishna-Godavari gas find estimates

India has dramatically reduced the estimated size of recent gas discoveries in the Krishna-Godavari (KG) basin of Andhra Pradesh, which could diminish the area's attraction to the world's top energy players.

Shirish Nadkarni
OGJ Correspondent

MUMBAI, Aug. 13 -- India has dramatically reduced the estimated size of recent gas discoveries in the Krishna-Godavari (KG) basin of Andhra Pradesh, which could diminish the area's attraction to the world's top energy players.

The seventh round of bidding for 85 oil and gas blocks under the New Exploration Licensing Policy (NELP-VII), which includes blocks in the Cauvery basin, was originally scheduled for last April, postponed until later this month, and now pushed back again to November.

Two of the country's state-run explorer-producers, Oil & Natural Gas Corp. (ONGC) and Gujarat State Petroleum Corp. (GSPC), earlier had announced discoveries off the hydrocarbon-rich Indian East Coast but later were forced to concede that the finds were much lower than initially projected.

ONGC cut to less than one-tenth the estimated size of its KG basin find—to 56.6 billion cu m (bcm) from 595 bcm it had forecast in December 2006, while GSPC slashed even more drastically the potential size of its gas finds to 39.1 bcm, from 566 bcm it had reported in June 2005.

The admissions were a victory for Director-General of Hydrocarbons V.K. Sibal, who had been bitterly criticized by ONGC for refusing to accept the size of ONGC's KG basin gas discovery, which it originally compared to the huge gas find of Reliance Industries in the same basin.

The large disparity between the two sets of figures has induced experts to urge the Indian authorities to tighten the norms for announcing oil and gas discoveries to prevent exploration companies from overreporting or extracting economic and political capital from such new finds.

The revised ONGC and GSPC figures also threaten to undermine New Delhi's claims that India will soon have a gas surplus and become a net exporter of the fuel. Gas supply in the country was expected to reach 188 million standard cu m/day (MMscmd) by 2009-10, a significant rise from the present level of 80 MMscmd.

India also has been encouraging power and fertilizer plants to switch to gas from naphtha to cut costs. But those plans may now go awry, given that there will be less domestic gas production than was initially projected.

Gas imports
The country imports 70% of its crude oil requirements and is able to meet half its gas demand of 170 MMscmd via its domestic production. The deficit in gas consumption is covered by LNG imports from countries such as Qatar.

Prospects of accessing international gas sources have brightened with progress in talks on the Iran-Pakistan-India pipeline, a recent agreement with Algeria for LNG, and Indian plans to join the $13 billion trans-Saharan gas pipeline.

Turkmenistan also recently said it is interested in building a gas pipeline across Afghanistan to Pakistan and India (OGJ, July 23, 2007, Newsletter). India is still hopeful of buying gas from Myanmar, despite China's moves to secure supplies from the country on an exclusive basis.

ONGC has kicked off negotiations with ExxonMobil Corp. to import 8 million tonnes of LNG from Russia's Sakhalin gas fields.

Finally, Indian Petroleum Minister Murli Deora announced in July that the country would source 1.25 million tonnes of LNG from Algeria by 2009. State-controlled Petronet LNG is to secure gas from Sonatrach, a move that would add gas supplies to those already on contract from Qatar.

Despite these moves to secure sufficient gas, India's hopes of selling all blocks in the Cauvery basin at a good price under NELP-VII may suffer a setback because of its laxity in earlier announcements of the size of gas finds.

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