Consortium to pump $100 mn into Assam, Nagaland oilfields

Consortium to pump $100 mn into Assam, Nagaland oilfields

Oil exploration and production activities in Assam and Nagaland may receive a boost with Assam Co. Ltd, the country’s oldest oil exploration company (it began oil exploration in 1892), and Canadian firm Canaro Resources Ltd deciding to invest $100 million (Rs395 crore) in exploring two blocks—one in each state.

The consortium claims to have discovered new oil reserves in these blocks—Amguri near Jorhat in Assam and AAON-7 in Nagaland. The Directorate General of Hydrocarbon, the government arm that ratifies oil and gas finds and assesses whether they are commercially viable, has ratified these finds.

“We have struck oil in one of the new wells in the Amguri block which is giving us about 1,000 barrel oil equivalent (BOE) a day. In another well, Amguri 11, we have found two new reservoirs, which we estimate could gives us close to 3,100 BOE a day," said Abhay Chawdhry, director and chief financial officer, Assam Co. That volume of output makes the two very small finds.

Assam Co. is the third oil firm to report a discovery in Assam this year. Earlier, Premier Oil of UK and the state-owned Oil and Natural Gas Corp. Ltd (ONGC) reported gas finds in the state. Premier found gas at a block at Pechadhar near Silchar in southern Assam, about 320km from the state’s main city Guwahati, and ONGC struck gas in the Cachar area of the state.

Assam has more than 1.3 billion tonnes of proven crude oil and 156 billion cu. m of natural gas reserves. Of this, an estimated 58% of the reserves are yet to be explored. The state currently produces about five million cu. m of natural gas annually. One barrier to exploration has been insurgency in the state.

The average per-day yield for producing fields in the Assam-Arakan basin In which the two blocks are located is around 300-400 BOE a day.

The Amguri and AAON-7 blocks were awarded to the Assam Co-Canaro consortium in the pre-new exploration and licensing policy (Nelp) rounds. In pre-Nelp round blocks, the government takes its share of the oil or gas only the after the contractor has recovered twice its investment. Assam Co. holds 40% and 35% stake in the Assam and Nagaland blocks, respectively, while Canaro, which holds 60% and 65% stake,respectively, is the operator for both blocks. Assam Co. is part of the Kolkata-based Duncan Macneil group.

The larger issue for oil companies in Assam is the scalability of the finds, said Arvind Mahajan, head of energy practice at KPMG, a global audit and consulting firm. “When you look at the scale of operations in Bangladesh where Cairn Energy Plc. is producing around 50,000 barrels of oil a day, these finds look small. The important thing here is that more than 50% of Assam’s oil potential is still unexplored. But it will only attract the smaller foreign players. The big boys will come only if these discoveries are found to be scalable to a level that sustains their interest," he added.