The exploration and development of new oil and gas reserves are critical for India. One of the world’s fastest-growing emerging economies today has to import nearly three-quarters of its oil supplies to feed soaring demand – in 2010 the subcontinent, along with China, accounted for 40% of the global increase in oil demand.

But despite the government’s efforts over the past decade to entice western players into its upstream sector, a general perception within the industry of rather chaotic licensing rounds and conflicts between the state-run major Oil and Natural Gas Corp. (ONGC) and the country’s industry regulator, the Directorate General of Hydrocarbons (DGH), are threatening to derail India’s ambitious growth plans.

India has a projected growth rate of 8% to 9% per year, and its energy needs are expected to triple by 2035 from 468 million tonnes of oil equivalent (MMtoe) at present to nearly 1,405 MMtoe.

Vantage Drilling’s Platinum Explorer deepwater drillship

Vantage Drilling’s Platinum Explorer deepwater drillship is on a five-year contract with ONGC offshore India. (Photo courtesy of Vantage Drilling)

At the forefront of the challenge to find new reserves are ONGC and the privately-run Reliance Industries Ltd. (RIL). Although ONGC has by far the lion’s share in terms of acreage and production at present, it was RIL that little over a year ago took the boldest step by entering into its US $7.2 billion strategic partnership with BP. The UK major’s reasons for partnering with RIL were to pursue upstream opportunities in the prolific Krishna Godavari (KG) basin, which lies onshore and offshore the east coast between Chennai and Kolkata, and to create a pathway into the downstream sector to provide the country with fuel.

Back in 2008 BP and Reliance formed a 50/50 joint venture (JV) for deepwater exploration D17 block in the KG basin, where seismic data acquisition is due to get under way this year.

But the mega-deal last year saw the two companies enter into a partnership to cooperate across the entire hydrocarbon value chain. In the upstream, BP took a 30% stake in 23 almost entirely deepwater blocks covering around 270,000 sq km (104,200 sq miles), with both to also bid together for incremental opportunities in other deepwater blocks off India’s east coast.

With Reliance as the operator, BP also is now bringing its subsurface understanding to the table, helping RIL optimize gas recovery from high-profile projects such as the world-class KG-D6 block. This block currently provides around 45% of all gas produced in India from fields such as D1 and D3 (22 wells including 18 producers) but has been suffering from declining production volumes due to reservoir complexity, higher than envisaged water ingress, and natural reserves decline.

Significant steps already have been undertaken by the JV technical teams in assessing these complexities, based on which plans for workovers, side tracks, and additional wells have been planned, with execution subject to necessary approvals.

The early signs are already encouraging – the D6 gas fields had completed 900 days of 100% uptime and zero-incident production by year-end 2011. Average gas production from the block was 55.9 MMcm/d, with a cumulative production of 1,257 Bcf since inception. Average oil production for 2011 from the block was 21,971 b/d, with cumulative output of 14 MMbbl of oil and condensate since inception.

The companies are now working up an integrated field development plan for all the gas discoveries in KG-D6, encompassing existing wells and other satellite discoveries within the block to maximize capital efficiency and accelerate monetization. An outline development plan for four satellite fields was approved in January, with engineering studies now foregoing. These four fields will eventually be tied back 76 km (47 miles) to the existing production facilities on the D1-D3 fields.

Reliance also was busy with the drill bit over the course of 2011, making six discoveries including W1 in the KG-V-D3 block, as well as onshore wells AF1, AJ1, AT1, AN1, and AR1 in its CB-10 block. It has submitted an integrated appraisal program for all its CB-10 discoveries. The company has submitted initial proposals for commerciality to the DGH for review and discussion for the discoveries of D33 in the GS-01 block (recently approved by the Government), D39 and D41 in the KG-V-D3 block, and D36 in the KG-D4 block.

Further appraisal of these finds is scheduled through 2012.

East coast crown jewel

India’s east coast remains the crown jewel for the country’s offshore sector, and ONGC is focused on the area.

The company already has oil flowing from its G1-GS15 field development in the KG basin, with the GS15 portion of the project lying in shallow water around 5 km (3 miles) offshore. However, the G1 portion of the development will see ONGC bring onstream what will be its first operated deepwater project offshore India, with the field located nearly 30 km (19 miles) from the coast in 500 m (1,640 ft) of water.

The G1 field is planned to come onstream in May 2012, at a rate of 2 MMcm/d, while output from GS15 is expected to plateau at more than 9,000 b/d. Development of several other nearby fields is scheduled to get under way before year-end and through 2013.

Close by it also has the high-profile KG-DWN-98/2 block, which lies adjacent to Reliance’s D6 fields. ONGC is planning to start a first production phase within the next six years and has previously flagged overall investment levels of nearly $8 billion for the project.

Cairn India had made four discoveries in the block before selling a 90% stake to ONGC in 2005. ONGC then made a further six discoveries and its first ultra-deepwater discovery, UD-1, in the block. The UD-1 discovery lies in the southern part of the block in 2,841 m (9,321 ft) water depth and would be by far the most technologically challenging ultra-deep discovery in the country.

The company is focusing on two options, one being a standalone development of the main field area, while the other would involve an integrated development of the main field as well as the northwest area of the block. Initial estimates place development costs at nearly $3 billion for the first phase, with in-place reserves estimated by the DGH at 3.9 Tcf of gas.

Up to 11 production wells would be drilled at UD-1 to initially produce it, with a peak rate eventually predicted at around 715 MMcf/d.

However the state-owned major, with its limited deepwater experience, remains on the lookout for an experienced western partner after losing former block partners Statoil and Petrobras several years ago when it decided the block was not a priority.

Although the BG Group has been repeatedly linked with ONGC, ConocoPhillips has recently thrown its hat in the ring over a possible multi-block partnership; however, this remains in the early stages of discussion.

It has been reported that up to 19 blocks offshore east and west coasts could be part of a deepwater exploration deal.

Off the country’s west coast there already are some promising discoveries that ONGC is progressing. The company has a potential fast-track development under consideration for the Daman (Main) and Daman (North) prospects in the B-12 and C-24 blocks.

Doubling reserves

Strategically, ONGC remains on a clearly stated mission to double its reserves to 12 Btoe by 2020, finding new reserves via the drill bit and using new technologies to improve its recovery factor. The goal is to raise the factor from around 28% in 2000 to a planned 40% by the end of this decade.

It already has made significant progress in this regard, with its recovery factor raised from the initial 28% figure to 33.5% in 2011. A total of 15 out of 21 IOR/EOR redevelopment projects have already been completed, with an estimated cumulative gain of 64 million tonnes. ONGC currently has 107 well stimulation units in action, with 121 drilling rigs in action (87 onshore, 34 offshore).