May 25, 2018 / 8:23 AM / 2 years ago

India's ONGC to quadruple output from Bay of Bengal gas field that cost $1 bln

* ONGC expects to quadruple Deendayal output by January 2019

* Gas output from field could grow to 3 mln cubic metres a day

* Increase to give ONGC 3rd straight year of gas output gain

By Promit Mukherjee

MUMBAI, May 25 (Reuters) - India’s state-owned exploration company Oil and Natural Gas Corp will by early 2019 quadruple the output from an offshore gas block in the Bay of Bengal that it spent a billion dollars on last year, according to a senior ONGC official.

Output from the Deendayal natural gas block off India’s east coast will reach as high as a million standard cubic metres per day by January 2019, according to Rajesh Kakkar, head of ONGC’s offshore division.

ONGC bought the Deendayal field in 2017 from state-owned company Gujarat State Petroleum Corp (GSPC) while it was still undergoing test runs for commercial gas production.

The increase in production is marginal against India’s total consumption, although Kakkar said the field has a potential to go up to 3 million cubic metres a day, which would make up about 4 percent of ONGC’s total output.

“The project will also help us in developing the adjoining gas fields in the KG (Krishna-Godavari) basin at lesser capex (capital expenditure) and time,” said Kakkar.

ONGC and Reliance Industries Ltd, along with partner BP Plc, are developing several natural gas discoveries in the KG basin. These discoveries could contribute up to 50 million cubic metres of daily output, or about a third of India’s current demand.

ONGC, which meets up to 40 percent of India’s total natural gas demand, had been saddled with ageing fields and dropping production for almost a decade.

But the company registered a marginal jump in production in fiscal 2016/17, and then production increased by another 6 percent last year in the year through March 2018.

Analysts said the increase in output from the Deendayal field will help ONGC in clocking an increased overall output in the current fiscal year as well.

The Deendayal gas field was discovered in 2005. The project was a flagship gas initiative of Indian Prime Minister Narendra Modi, who at the time was chief minister of Gujarat state on India’s west coast.

Modi said then that the field held up to 20 trillion cubic feet (560 billion cubic meters) of natural gas, although delays and cost overruns in developing the field had some analysts questioning the quality of the investment for ONGC.

ONGC, however, will be able to monetise the gas at a higher price and with more marketing freedom under new rules meant to encourage the development of frontier offshore reserves.

Prime Minister Modi has set a target of increasing the share of natural gas in India’s energy mix to 15 percent by 2030, from 6.5 percent now. Modi also wants to cut down on energy imports, especially crude oil.

India consumed around 145 million cubic metres of natural gas a day, nearly 50 percent of it imported, in 2017/18.

The government has projected India’s potential demand at nearly 500 million cubic metres of gas a day. (Reporting by Promit Mukherjee; Editing by Tom Hogue)

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