Mumbai: Concerned by the possibility of a production collapse at its biggest gas field, Oil and Natural Gas Corp. Ltd (ONGC) plans to invest 5,000 crore to drill new wells, install a new platform and explore surrounding areas to extract more gas, a company executive said.

The results should start showing in two-to-three years, said the executive, who did not want to be identified.

Located 80km off the Mumbai coast, the Bassein gas field, also called the Vasai field, produces up to 24 million standard cubic metres per day (mscmd).

In comparison, Reliance Industries Ltd’s D-6 block in the Krishna Godavari basin produces 13 mscmd. In the last fiscal year, revenue from the Bassein field was worth 8,000 crore, nearly 10% of ONGC’s total revenue of 83,000 crore.

A second official, who also declined to be named, confirmed the investment plan and pointed to a rapid decline in output. “Production from the field is expected to decline at a rate of 2 mscmd per year and can reduce to zero in the next 10 years. This investment will help the company in maintaining the production at a reasonable rate of 10 mscmd beyond 2022."

The company has already recovered 65% of the available gas resources in the field and there was a possibility of recovering another 20%, the second person said. He did not share figures on the total reserves in the Bassein field.

ONGC is also hoping to boost output by raising production at two so-called satellite fields, which currently produce up to 8 mscmd.

“We have a board approval for another 2,500 crore to develop Vasai East which will add up to 2.5 mscmd by 2017-18," the first executive said.

The ONGC board on 24 March cleared up to 2,500 crore of investment in the Vasai East field—a satellite discovery off the Bassein field— which it said will give add output of 1.971 billion cubic metres (bcm) by 2030.

Analysts and energy experts have often criticized ONGC for failing to raise production in the last 10 years. As demand for fuel rises in a growing economy, output at ONGC’s energy fields has stagnated or fallen.

Discovered in 1976, the Bassein field started producing gas in 1988. It achieved a peak output of 29 mscmd in 2011 before starting to decline. The field, now in its 26th year, is well past its estimated life of 20 years.

Officials say even maintaining production from ageing fields is a challenge.

“One has to understand oil and gas production is not a manufacturing industry. We have to deal with matured fields where the rate of decline is almost 8-10% per annum. Maintaining production from these fields is an expensive and technically challenging process and ONGC has successfully done that," said Rajesh Kakkar, asset manager at Mumbai High—ONGC’s biggest crude oil producing field.

ONGC’s flagship oil field was discovered in 1974 and produces 206,000 barrels per day (bpd) or a little over 10 million tonnes per annum (mtpa). At its peak in 1988-89, the field produced 400,000 bpd or 20 mtpa.

“We have been able to maintain output from the field at 10 mtpa for the last several years and expect to maintain at that rate for the next 10 years," Kakkar said.

During the company’s annual general meeting on 19 September, D.K. Sarraf, chairman and managing director of ONGC, said the company had invested up to 81,890 crore in the last few years to increase production.

Analysts say that fiscal 2015 could be the first year in 10 years when the company will actually see an increase in production from domestic sources.

“ONGC has started work on six marginal field projects with a few of them to be commissioned in CY14/15, which gives better clarity on domestic production growth in both oil and gas. These fields are currently producing 1million tonne of crude and 1.2bcm of gas and management expects them to contribute 3million tonne of crude and 2.5bcm of gas by FY15," said Dhaval Joshi, an analyst at brokerage Emkay Global Financial Services Ltd.

According to Tapas Kumar Sengupta, director-offshore of ONGC, the company expects a jump of 1-1.5 million tonnes of oil equivalent (mmtoe) in production during the current year, coming mainly from its marginal fields.

In FY14, the company’s domestic oil and gas production was 45.03 mmtoe, its lowest in a decade.

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