India’s largest exploration and production firm, Oil and Natural Gas Corp. (ONGC), is seeking extension of the work development programme on a few of its offshore blocks won under the new exploration licensing policy (Nelp), citing shortage of rigs and manpower required to carry out the operations for an indefinite period.
The corporation is seeking the extension to avoid paying penalties for its inability to achieve the target given to the government.
The corporation is the second company after Mukesh Ambani-owned Reliance Industries Ltd to seek an extension
“We have huge work programmes and don’t have the available resources to complete it. Today, rigs are not available at any price. Due to this, we are seeking the extension,” said R.S. Sharma, ONGC chairman and managing director. ONGC is the second company after the Mukesh Ambani-owned Reliance Industries Ltd (RIL) to ask for an extension.
The oil and gas major is the operator in 61 blocks with participatory interests in 10 other blocks where other firms are operators. It also has the most number of rigs in the country. Of the 100 rigs with it, 30 are offshore rigs. Of these, it owns 10 and has leased the rest.
“This extension is for a few of the blocks got under Nelp. We are asking for some more time which will depend on the duration taken to get the rigs,” said D.K. Pandey, director, exploration, at ONGC.
According to industry analysts, sourcing of an offshore rig can take up to four years.
A delay in the work development programme could impact its 11th Plan (2007-12) targets. During the Plan period, ONGC has projected production of140 million tonnes (mt) of crude oil and 112.4 billion cu.m (bcm) of gas.
Heightened exploration activity has meant that rigs are in short supply all over the world. This in turn has pushed the daily rentals of a deep-water rig to around $300,000 (Rs1.19 crore), while an ultra deep-water rig may command a daily rental of $400,000 (excluding service cost).
A senior New Delhi-based oil and gas sector analyst, who did not wish to be identified due to commercial considerations, said, “It is a clear signal that this market needsmore players. This is an important development, coming as it does before the seventh round of Nelp, or Nelp-7. This will also make the international oil and gas majors question the inability of the companies getting blocks to complete the minimum work programme. However, it is a genuine challenge as there is a constraint of resources worldwide.”
ONGC has been slipping in its targets for both exploratory and development drilling. Of the targeted 138 wells for exploratory drilling in 2006-07, it succeeded in drilling only 87. It could complete development drilling of only 178 wells against the targeted 214.
The paucity of rigs has delayed the exploration and production plans of several companies and has also forced the government to defer Nelp-7, where exploration blocks are auctioned.
ONGC produces 685mt of crude and 375bcm of gas, from its 115 fields. The western offshore contributes around 71% of the total produce.