INDIA EXPANDING OIL/GAS E&D, INFRASTRUCTURE

India continues to press oil and gas exploration and development and expansion of its petroleum sector infrastructure. One of the key moves is the government's decision to stage a fourth exploration bidding round, its most ambitious to date and one expected to elicit enthusiasm from international oil companies. At the same time, state oil companies Oil & Natural Gas Commission and Oil India Ltd. plan to maintain strong domestic E&D programs.

Sept. 9, 1991

10 min read

India continues to press oil and gas exploration and development and expansion of its petroleum sector infrastructure.

One of the key moves is the government's decision to stage a fourth exploration bidding round, its most ambitious to date and one expected to elicit enthusiasm from international oil companies.

At the same time, state oil companies Oil & Natural Gas Commission and Oil India Ltd. plan to maintain strong domestic E&D programs.

ONGC is seeking more revenue to sustain India's ambitious oil and gas upstream plans. The state company has asked the government for a 50% hike in the price of domestic crude. The government currently pays ONGC and OIL only about $8.84/bbl, a price fixed in 1981.

A jump of 50% in the domestic crude price would net ONGC another $1 billion/year in revenues, ONGC Chairman S.L. Khosla said.

The government and other state companies also continue efforts to expand gas utilization and markets and match refining plans with market needs.

FOURTH ROUND

India's government has approved terms and conditions for the country's fourth round of bidding for exploration acreage.

The new government under Prime Minister P.V. Narasimha Rao has acted quickly to comply with conditions of an initial $150 million World Bank loan provided for gas flaring reduction and further development in the Bombay High offshore area (OGJ, Aug. 12, p. 27). The World Bank had called for an expedited fourth round as a condition of the loan.

The decision triggered another $150 million loan, from Japanese banks, to help pay for India's oil imports this year.

Bid dockets were prepared with help from Arthur D. Little & Co.

Government officials expect a strong response from foreign and Indian oil companies because the areas to be offered are considered highly prospective.

Although terms and conditions remain about the same, India will offer much more acreage than in the past. If bidding proceeds smoothly, exploration can get under way soon after the monsoon season ends in October.

India will offer more than 75 blocks in the fourth round, including acreage adjoining Gandhar oil field in Gujarat state.

In the previous bidding round in 1986, Amoco Corp., BHP Petroleum Pty. Ltd., Chevron Corp., International Petroleum Ltd., and Texaco Inc., acquired acreage in western and eastern Godavari basins. No significant discoveries have been reported on third round acreage.

In the first round of exploration bidding, in 1979, India offered 17 offshore and 15 onshore blocks. In the second, in 1982, it offered 42 offshore and eight onshore blocks, none of which resulted in contracts.

PRIVATE DOMESTIC FIRMS

Private Indian companies will be allowed to participate in exploration bidding for the first time. And foreign companies will be allowed to bid for acreage previously reserved for India's state owned companies. It is likely foreign companies will enter into exploration joint ventures with Indian oil companies.

There are steps being taken to pave the way for such ventures. International Finance Corp., private sector lending arm of the World Bank, has taken a 25% interest in a proposed Krishna-Godavari offshore exploration project.

The move is seen as significant because of efforts to solicit more interest in Indian exploration from private domestic and foreign oil companies. IFC will invest $8.22 million in the $33 million project. Partners are International Petroleum Ltd. of Dubai and a unit of Hardy Oil & Gas plc of the U.K.

India also is considering joint exploration with Sri Lanka in the Palk Straits. Two years after Sri Lanka first proposed such a venture, India has agreed to a feasibility study focusing on Palk Straits exploration by ONGC and Ceylon Petroleum Corp.

OFFSHORE E&D

ONGC may be on the track of a major oil discovery in the Bombay High offshore area, source of most of India's oil and gas production.

Its RBC-1 wildcat flowed 1,685 b/d of oil through a 1/2 in. choke and 2,177 b/d through a 5/8 in. choke from Eocene Bassein limestone at 6,532-55 ft. Gravity is 42.7, gas:oil ratio 114:1, and hydrogen sulfide content 12,000-19,000 ppm.

It was spudded Apr. 28 with the Explorer jack up in 200 ft of water in the Ratnagari sector of the Offshore Bombay area 100 km southwest of Bombay. Production tests began July 29.

The reservoir may be in communication with the R-13 oil discovery 2 1/2 km south. If it is one structure, it could cover an area of 20 sq km, said Petroleum and Natural Gas Minister B. Shankaranand. Bassein limestone is the key oil and gas pay in Heera, Panna, Ratna, Bassein, and other fields in the Offshore Bombay area.

Meanwhile, ONGC has let contract to Mazagon Docks Ltd. for seven offshore platforms, valued at a combined $140 million, for installation in the Bombay High area. The move represents a reversal of ONGC's previous policy of having such facilities built abroad.

ONSHORE E&D

ONGC has another well at Nannilam, where it drilled a light, sweet crude discovery on the Cauvery basin prospect last year (OGJ, Apr. 16, 1990, p. 32). Its fifth well at Nannilam, in Thanjavur district of Tamil Nadu, flowed 500 b/d of oil.

At another Thanjavur prospect, ONGC's second well at Kamalapuram flowed 490 b/d of oil and 2.1 MMcfd of gas. A third Kamalapuram well flowed 635 b/d of oil and 436 Mcfd of gas. Further testing is under way.

In addition, ONGC found oil in the Lingala, Kaicalur, Mori, and Bantumilli structures in Krishna and East Godavari districts of Andrha Pradesh. It plans to delineate Lingala, Kaicalur, and Mori.

ONGC was expected to complete drilling of the first wildcat at Jabera, 60 km northwest of Jabalpur in Madhya Pradesh, last month. It is targeted to 11,483 ft. Other locations ONGC is scheduled to drill this year are Shanganpur and Balyasan in Mehsana, Gujarat, and Bankia and Lang in Rajasthan.

On the development scene, ONGC has proposed drilling 39 infill wells in Upper Assam to achieve targeted capacity of 63,000 b/d.

OIL IN GANGA VALLEY

OIL has kicked off a $50 million exploration campaign in the Ganga Valley basin.

The state company started a seismic survey in the Kashipur area of western Uttar Pradesh last spring. It let a $1 million contract to a venture of Alpha Geo (India) Ltd., Hyderabad, and Alpha Geo (USA) Inc., Houston, to use vibroseis to acquire 600 line km.

OIL's spending target for Ganga exploration covers the government's eighth planning period, 1991-95. It has earmarked $30 million of that total for conducting 14,000 line km of seismic. Tentative plans call for eight wildcats during the period.

OIL's exploration licenses in the Ganga Valley include two blocks covering a combined 46,000 sq km. It is focusing on the Sarda depression covering 13,000 sq km in the Kashipur area, Gandak depression covering 15,500 sq km in the Gorakhpur area of eastern Uttar Pradesh, and 17,500 sq km in the Motihari area of western Bihar.

GAS E&D

India's state oil and gas companies continue to find significant gas fields.

ONGC last spring drilled a gas strike near Bassein gas field in the Bombay High offshore area.

Its BS-13 well flowed 10.4 MMcfd of gas and 236 b/d of condensate. At the time, ONGC estimated reserves at 230 bcf. ONGC announced plans to delineate the discovery and to drill a wildcat on the adjacent BS-12 structure.

ONGC recently unveiled details of two commercial gas discoveries in the Krishna-Godavari basin in Andhra Pradesh. Its 1 Penumadam, 18 km northeast of Naraspur, flowed at a combined rate of 7.5 MMcfd and 54 b/d of condensate through a 20/64 in. choke from pay at 8,106-26 ft and 8,077-90 ft. Total depth is 9,842 ft.

ONGC 1 Banda-Murlanka, 10 km south of Amalapuram, flowed 955 Mcfd of gas and 203 b/d of condensate through a 10/64 in. choke from pay at 10,285-295 ft. Total depth is 11,585 ft.

ONGC also drilled a gas strike at Endamaru, 14 km southwest of Kakinada in Andhra Pradesh. Its 1 Endamaru flowed 3.3-7 MMcfd of gas through various chokes from pay at 6,079-6,125 ft. Total depth is 7,172 ft. The structure covers 3 sq km.

OIL is focusing mainly on gas in its $100 million, 22 well Rajasthan E&D program for fiscal 1991-95.

OIL's current production is limited to Assam and Arunachal Pradesh. It has set targets of 224,407 ft of footage drilled and confirming reserves totaling 971 bcf of gas and 50 million bbl of liquids.

In the first phase of the program OIL drilled 2 Tanot to 7,546 ft and 2 Ramargh to 5,249 ft, with no results disclosed.

INFRASTRUCTURE, MARKETS

Given India's high volumes of flared gas and shut-in oil, the country's aggressive E&D campaigns point to future markets.

On the gas infrastructure side, there is progress toward developing a nationwide gas grid (see map, OGJ, June 4, 1990, p. 23).

Gaz de France has offered to cooperate with Gas Authority India Ltd. (GAIL) to lay a natural gas distribution system for the Greater Bombay area. GAIL has put out an international tender for bids to lay and operate the system and has received similar bids from British Gas plc and Tokyo Gas.

Earlier this year, GAIL received government approval for the $280 million project, provided it secures financing on its own. Under the original plan, GAIL had planned to secure foreign loans to import metering equipment for the system, which may prove difficult in light of India's balance of payments crunch.

ONGC noted that commissioning last spring of new process platforms in the Bombay High offshore area and the 81 km Heera-Uran trunk pipeline has reduced flaring by 70 MMcfd.

As for new uses for gas, ONGC has drawn up a $115 million plan to back out diesel fuel and gasoline by converting motor vehicles to compressed natural gas. ONGC has targeted several cities along the HBJ pipeline system located near gas fields and feeder pipelines and the national highway system for pilot CNG conversion programs. It estimates total CNG conversions at 425,000 vehicles by 2000.

On the oil side, India continues to grapple with shut-in oil wells and a shortfall of refining capacity.

ONGC has shut in 55 wells for lack of infrastructure, bringing the country's total in that category to 728. There are another 470 wells in India shut-in for economic reasons: 272 in the western region, 99 in the eastern region, 90 in the Bombay High area, and nine in the southern region.

New Delhi currently is reviewing all refinery projects scheduled for the eighth planning period because of a cash crunch the government faces. The government's Oil Coordination Committee has run up a huge deficit and has not been able to pay some of the money it owed the state oil companies.

Being reviewed again are the 120,000 b/d Karnal refinery, 60,000 b/d refineries at Mangalore and Assam, 10,000 b/d Cauvery basin refinery, and expansions of 60,000 b/d at Koyali, 40,000 b/d at Cochin, and 3,000 b/d each at Digboi and Guwahati.