Oil India to start production from Gabon block next fiscal

New Delhi: State-run exploration and production company Oil India Ltd plans to start oil production from its Gabon block in the next financial year, with the construction of the wells to be completed over the next few months, said two people in the know of the development.

The company which has a 50% stake in the Shakthi-II block in the central African country will soon issue a tender for local vendors. Oil India and Indian Oil Corp. own 50% stake each in the block and the former is the operator of the block.

"It is expected to be operationalized next fiscal. There was a likelihood that it would start this year, however due to some issues with local contractors, a new tender would have to be issued, which would be done soon," said one of the two people mentioned above, adding that currently pre-drilling activities are underway.

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The company would complete drilling of all the four planned wells by the end of FY25, the person said.

An oil discovery was made in a well 'Lassa-1' in the 'Old PSC' (production sharing contract). Further, according to annual report for FY24, two appraisal wells (Lassa-2 & 3) were drilled under the phase 1 of the new production sharing contract. The consortium has carried 1,213.04 LKM (line kilometer) of new 2D seismic data acquisition, processing and interpretation (API) to assess the prospects in the remaining part of the block.

Now under the phase II, the consortium has commitment to drill two more exploratory wells of the block. "The block in Gabon is a major asset with immense potential, Indian companies are quite seriously pursuing it," said the other person in the know.

Queries mailed to Oil and Indian Oil remained unanswered till press time.

Delays in energy procurement

The project has been impacted by regulatory delays and the covid pandemic. The development assumes significance given the setbacks suffered by state run firms including OIL in their equity energy assets overseas. The latest case in point being India’s inordinate wait for liquified natural gas (LNG) supplies from the marquee $20 billion Mozambique project getting longer, with OIL also being a stakeholder in the Rovuma Area-1 Offshore Mozambique (Area-1) block.

The company’s overseas exploration and production (E&P) portfolio is spread over seven countries which are Russia, Venezuela, Mozambique, Nigeria, Bangladesh, Libya and Gabon.

The consortium was allocated the block for exploration in 2006. The project has been impacted due to its interior location, regulatory delays and the covid pandemic.

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The development assumes significance given the setbacks suffered by state-run firms including OIL in their equity energy assets overseas. The latest case in point being India’s inordinate wait for liquified natural gas (LNG) supplies from the marquee $20 billion Mozambique project getting longer, with OIL also being a stake holder in the Rovuma Area-1 Offshore Mozambique (Area-1) block.

The likelihood of production in the Gabon block next year is also important as India has been making efforts to tap international assets and sign long-term deals for oil and gas supplies in a bid to ensure energy security. The efforts have gained momentum amid the Russia-Ukraine war as energy prices soared to multi-year highs in 2022 after Russia's invasion of Ukraine.

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India is the third largest importer of oil, and imports about 85% of its total energy requirement. In FY24, it imported 233.1 million tonne (mt) of crude oil, compared to 232.7 mt in the previous fisc