Oil and Natural Gas Corp., will partner with Baker Hughes Inc. in an effort to increase gas production from its two fields in the Krishna Godavari basin. “We will be paying them to improve the commercial production from our producing fields in the Krishna Godavari basin. Based on their recommendations, we will be investing in technology and equipment,” said a senior executive at ONGC, who did not wish to be identified. The two fields where ONGC wishes to increase production are Mandapeta and Nandigama.
ONGC currently produces 660 million metric tonnes (mmt) of crude and 350 billion cubic metres (bcm) of natural gas from 115 fields. It plans to improve its average recovery of 28% from its fields to 40%. This is where it needs the help of exploration and production (E&P) specialists.
Baker Hughes provides the oil and natural gas industry products and services for drilling, formation evaluation, completion and production, and is among the top companies in its field. It competes with firms such as Schlumberger and Halliburton.
ONGC already has a memorandum of understanding with Baker Hughes Singapore Pte (signed in 2005) for a broad corporate strategic alliance rather than an owner-contractor relationship.
In a related development, ONGC is also in talks with Schlumberger for augmenting production from two of its oil fields, Navagon and Kalol.
ONGC expects its gas production to fall from 47.28 million metric standard cubic metres per day (mmscmd) in the current year to 32mmscmd in 2011-12. The country is currently suffering a gas shortage that is expected to last till 2012, and it does not produce enough oil to feed its growing economy.
The demand for gas in the country is 180mmscmd as opposed to supply of 81mmscmd. The shortage has affected power plants, and gas-run fertilizer and cement companies.
Prayesh Jain, an analyst at stock market research firm India Infoline, said that ONGC’s recovery rates have been lower than those of the global E&P players. “To get better recovery rates, it needs technology from companies such as Schlumberger and Baker Hughes. It makes great sense for ONGC to partner with them,” he added.
Most of the fields that ONGC has in the country are over 25 years old and oil and gas production from them is declining.
“There is a need to develop big fields along with augmenting commercial production from the existing fields. We are also in talks with some of the other service providers for our other producing fields,” the ONGC executive said.