The Hindu Business Line : ONGC appoints consultant for 3rd party audit of wells

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New Delhi Feb. 24 Oil and Natural Gas Corporation (ONGC) has appointed international reservoir consultant DeGolyer & McNaughton (D&M) to undertake third party audit for every well it drills. The State-owned oil and gas major has been receiving flak for deviating from its core business of exploration and production (E&P) activities from all quarters.

With growing competition in the sector and in order to avoid any instances of high input costs on exploratory wells, particularly those that have been termed as dry, it was felt that the company should adopt a system of third party audit. A senior ONGC executive told Business Line, "A suggestion had come from the Petroleum Ministry in July last year to adopt this system. The matter was deliberated at the company's executive committee meeting and subsequently D&M's name was approved."

The company is committed to highest principles of corporate governance and appointment of an independent auditor would bring more transparency, he said.

Besides, with rising costs, hitting dry wells could prove to be highly expensive for exploration companies and this is where this system could be of tremendous help, he added. An investment of Rs 25-30 crore goes into drilling onshore and offshore shallow water well, while drilling an offshore deepwater well costs Rs 150-200 crore.

ONGC has been following the international parameter prescribed by the American Petroleum Institute for auditing. Some other initiatives, like adoption of the Integrated Well Completion (IWC) mode in drilling, have now been accepted as a standard by some of the other operators as well.

Success rate

Questions have been raised time and again on the dip in company's oil and gas reserves. According to industry experts, ONGC's success rate in exploratory drilling stands at 1:5, including deepwater drilling where the probability of success is low. However, this success rate is better than what has been achieved in many developed countries, including the US, they added. The company drills around 150 exploratory wells every year, out of which approximately 30 produce oil and gas.

Currently, 99.7 per cent of ONGC's capital expenditure is on E&P alone. The company's total annual oil plus oil equivalent production is 52 million tonne and investment in augmenting offshore production is estimated at Rs 40,000 crore.

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