The Hindu Business Line : Rs 400-cr investment okayed for PY-3 oil field in Bay of Bengal

At a glance
The PY-3 oil field produces 6,000 barrels of oil a day through three wells.
Once the PY-1 field is developed, a pipeline would be built connecting PY-3 with it.
The linking of PY-3 and PY-1, when it happens, will help the 330-MW Pillaiperumalnallur power project.

Chennai , Sept. 13

An investment of $89 million (Rs 400 crore) has been proposed for the further development of the PY-3 oil field in the Bay of Bengal, off Pondicherry coast.

Four oil companies are partners in the PY-3 field — Hardy Oil of UK (18 per cent), Hindustan Oil Exploration Company (21 per cent), Tata Petrodyne (21 per cent) and ONGC (40 per cent). Hardy Oil is responsible for operating the field.

The field produces 6,000 barrels of oil a day through three wells.

The consortium's management committee met on Friday and approved the investment, which is for drilling two more wells, Mr Sastry Karra, President & CEO, Hardy Oil, told Business Line today. He said that another $100 million (Rs 450 crore) would be invested later.

About 22 km from PY-3 lies the PY-1 gas field. Hindustan Oil Exploration Company has the licence for the field, which is yet to be developed. "We understand that HOEC expects to lay a pipeline between PY-1 and the shore by the first half of 2008," Mr Karra said, whose company Hardy Oil, has a 8.5 per cent stake in HOEC.

Once the PY-1 field is developed, a pipeline would be built connecting PY-3 with it, Mr Karra said.

When this happens, the gas that is today produced and burnt off at the PY-3 field would be put to commercial use.

Production

The $89-million expansion project, that will take about two years to complete, will raise production from the field from 6,000 barrels a day to 8,000 a day. So far, 19 million barrels (2.3 mt ) of oil has been taken out of the field. Mr Karra said that another 30 million barrels (4 mt) could be pumped out, before the field dies. (Incidentally, in 1997-98, oil experts had written off the field as one that may not last more than 3-4 years.)

Implications

The enhanced production and life extension of the field is good news for Chennai Petroleum Corporation Ltd (CPCL) whose one million-tonne Cauvery Basin Refinery at Nagapattinam depends on the availability of local crude.

The refinery has a jetty but it cannot handle large ships that would be employed if CPCL were to import crude. "We depend on PY-3 crude for the refinery," Mr A. Kasturi Rangan, Director (Operations), CPCL, told Business Line. For several years, the refinery has been operating at around 65 per cent capacity. Therefore, enhanced production from PY-3 would help the refinery raise capacity utilisation.

The linking of PY-3 and the gas field PY-1, when it happens, will help the 330-MW Pillaiperumalnallur (PPN) power project. The project is today being fired by naphtha, an expensive fuel. Ironically, natural gas produced from the PY-3 field is being flared, while there is a power plant nearby hungry for the gas. It is not cost effective for the PY-3 gas to be piped onshore. Pipeline economics work out only when PY-1 and PY-3 are linked.

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