India is the world’s fourth largest economy after the US, China, and Japan, but only the fifth largest consumer of primary energy, after the US, China, Russia, and Japan. India’s energy mix includes coal (53%), oil (31%), natural gas (9%), hydro (6%), and nuclear (1%).

ONGC Chairman and Managing Director R.S. Sharma spoke at the India Market Opportunities briefing at the Offshore Europe Conference in Aberdeen, Sept. 10. Sharma said India holds 10% of the world’s coal reserves but only 0.5% of the world’s petroleum, so “sourcing energy remains a challenge.”

Looking ahead to 2013, ONGC estimates the compound natural growth rate for natural gas to be 7.9%, but Sharma believes that meeting the gas demand is an achievable goal and trans-national gas trunk lines are “likely.” He sees opportunities to develop gas infrastructure, exploiting existing east coast fields, new and marginal fields on the west coast, coalbed methane (CBM), and underground coal gasification opportunities.

India’s sedimentary basins have not yet been thoroughly explored, and Ernst & Young estimated in 2006 that it would require an investment of US $50 billion over 15 to 20 years to do so.

The country’s major producing fields (with 80% of current domestic production) are more than 30 years old and require cost-intensive improved/enhanced oil recovery processes to keep them flowing.

As an Indian State enterprise, ONGC is exploring at home and abroad (through ONGC Videsh Ltd.) to meet the country’s energy needs. ONGC’s E&P infrastructure includes 28 seismic crews, 79 drilling rigs, 78 workover rigs, and 108 well stimulation units. The company is in the process of refurbishing and upgrading its land drilling and workover fleet, incorporating several “state-of-the-art” technologies.

ONGC controls 48% of the acreage awarded under petroleum exploration licenses (PEL) and 67% of the acreage held under mining leases (ML) in India, based on the E&P Activity Report 2007-08 issued by the Directorate General of Hydrocarbons (DGH).

Reliance Industries Ltd. holds 32% of PEL acreage, followed by Oil India Ltd. and Cairn Energy India Pty. Ltd., each with 4% (others 12%). Oil India holds 14% of ML acreage, Cairn 8%, and Reliance only 1% (others 10%).

Not surprisingly, ONGC accounted for 81% of domestic crude oil production in fiscal year (FY) 2009 (ending Mar. 31, 2009) and 77% of domestic natural gas production, including the company’s share of production through joint ventures and production-sharing contracts (PSCs).

Sharma said ONGC invested $25.54 billion in capital expenditures in the past five years (including the $2.58 billion Imperial Energy PLC acquisition - Siberia); $16.33 billion (64%) of the total capex was spent on domestic E&P.

During FY’09, ONGC’s domestic E&P expenses were allocated 28% to capital projects, 26% exploratory drilling, 17% development drilling, 15% seismic, 10% PSC joint ventures, 3% integration, and 1% R&D. This means ONGC spent $7.02 billion on domestic drilling from April 2008 through March 2009.

In ONGC’s 2008-09 annual report, Sharma stressed that sustaining priority supplies was the first priority for the company, followed by improving recovery factors in mature fields, and then exploring outside the country. ONGC Videsh is participating in 40 E&P projects in 16 countries.

According to the annual report, ONGC planned to drill 373 wells (148 exploratory, 225 development) during FY 2010, up 15% from 324 wells (106 exploratory, 218 development) drilled in FY 2009.

ONGC holds 30% participatory interest in the Cairn-operated RJ-ON-90/1 pre-NELP block in Rajastahan. Cairn has made 25 oil discoveries (six major) and started production from the Mangala field in August 2009. ONGC will invest about $729 million (30% of capex) for development of the six primary fields.

R.K. Sinha represented the DGH at the briefing in Aberdeen. He discussed the Directorate’s role in “liberalizing the upstream industry” in India through the adoption of the new exploration licensing policy (NELP) in 1997 based on international pricing for crude oil and competitive bidding for exploration blocks. There are now 71 companies working acreage and 10 producing basins in India instead of a single state company. Contracts secured in NELP VII were signed Dec. 22, 2008, and NELP VIII (and CBM IV) road shows were held in Houston, Calgary, London, Perth, and Brisbane in August-September 2009.

Sinha said that 178 pre-NELP exploration wells were drilled in India 2000-08 (less than 20/year) but that 459 exploration wells are expected to be drilled in 2009-2012 (about 115/year) under existing license requirements.

India is now moving towards the Open Acreage Licensing Policy (OALP), which will allow companies to bid for blocks at any time of the year. The new OALP system should be in place by the end of 2010, replacing NELP.