Singapore/Mumbai: Oil and Natural Gas Corporation (ONGC) and Gujarat State Petroleum Corp. Ltd(GSPC) reduced the estimates of natural gas discoveries offshore India after the government challenged what it called “speculative forecasts”.
ONGC, India’s largest explorer, cut its projection of the Krishna Godavari basin find to 2 trillion cu. ft from the 21 trillion disclosed in December, said V.K. Sibal, director general of hydrocarbons (DGH), the regulator. GSPC’s gas field was lowered to 1.38 trillion from 20 trillion cu. ft.
Sibal has been telling oil companies for two years now not to announce discoveries before they can be verified because it hurts India’s credibility with investors.
The companies said they expect the deposits will be as large as first thought, which could supply the nation for 39 years. An energy shortage in the world’s second-fastest-growing major economy has increased pressure on state explorers to discover oil and gas.
“Oil & Natural Gas may have come under pressure to come up with the goods as it were, considering rivals have been announcing success after success,” Ian Blakeley, a manager responsible for India at oil services provider IHS Inc., said in a telephone interview from London.
India is seeking to cut dependence on oil imports that meet 70% of domestic needs.
ONGC and GSPC have in the last two years claimed India’s two biggest gas discoveries in the Krishna-Godavari area off India’s east coast. The figures eclipsed an earlier deposit in the same area of 11.3 trillion cu. ft by Mukesh Ambani’s Reliance Industries Ltd.
Reliance Industries is on schedule to begin production from its discovery in the KG basin by June of next year.
Reliance, India’s biggest company by market value, plans to produce 80 million cu. ft of gas a day, equivalent to the country’s current gas consumption, from the field.
Newspaper reports about the discoveries by ONGC and GSPC, which hadn’t been audited independently, prompted a reprimand by Sibal because the figures hadn’t yet been filed to his department.
Their announcements to the media broke rules set by his office to prevent share price movements based on premature information, he said in an interview by phone from New Delhi.
“The reserve estimates must be reliable because it affects investors,” Sibal said.
Companies classify reserves as proven, possible and probable. Investors rely on proven reserves, the quantity that can be extracted and sold.
“In India, what has been reported usually is the upper-end figure, representing potential and not actual reserves,” IHS’s Blakeley said.
ONGC’s 21 trillion cu. ft estimate was reported by PTI on 18 December, citing unidentified ONGC officials. The report led to a 4.7% rise in ONGC’s shares that day.
Exploration director D.K. Pande confirmed the figure in an interview on 16 January, without classifying the reserves as proven, possible or probable.
ONGC said the 2 trillion cu. ft figure filed to Sibal’s department is the result of initial drilling and may rise later.
“Since we’ve drilled only one well, we have accounted for possible in-place reserves of 2 trillion cu. ft,” Pande said 26 June. “We still have to drill two or three wells to come to a figure. It’s a huge structure, it’s about 600 sq. km.”
GSPC’s figure will rise after further drilling in the area, said spokesperson K. Prakash.
“The estimate released by the DGH is based only on one well drilled by us,” said Prakash. “The claim that the field holds 20 trillion cu. ft, which we reported earlier, will be established after we drill further,” he added.
Drilling work has been delayed for Indian explorers because of a global shortage of rigs. ONGC is among companies that have lost rigs to rivals in other countries as their contracts expired and the rigs moved elsewhere.