HOEC seeks to re-open dormant Bay of Bengal oil field

M RAMESH Chennai | Updated on January 27, 2018

P Elango, Managing Director, Hindustan Oil Exploration Company

A go-ahead to implement a $28-million plan to reopen the field will result in the production of at least 3,000 barrels of oil

Hindustan Oil Exploration Company is waiting for a nod from the authorities to re-start an oil field, PY-3, in the Bay of Bengal, which has been lying shut since July 2011.

A go-ahead to implement a $28-million plan to reopen the field will result in the production of at least 3,000 barrels of oil.

HOEC has a 21 per cent stake in the hydrocarbon asset, but the ‘operator status’ vests with UK-based Hardy Oil and Gas, which has 18 per cent stake in the field. Tata Petrodyne and ONGC have 21 per cent and 40 per cent interest, respectively. (In the hydrocarbons industry, oil and gas assets are typically owned by unincorporated joint ventures.)

HOEC wishes to take over the operatorship from Hardy Oil. The British company may not be averse to the handover, going by its recent press release. The release, dated November 24, 2016, says that if “the timely adoption” of a field development plan fails, “planning for abandonment will need to be initiated.”

The issue of transfer of operator status from Hardy Oil to HOEC is under the consideration of the Directorate General of Hydrocarbons, it is learnt.

Jinxed asset

PY-3 is the only oil-producing field in the southern part of Bay of Bengal (Cauvery offshore). In its heydays in the 1990s, PY-3 used to produce a handsome 10,000 barrels a day, but began to suffer decline as the ownerships often changed hands, impacting investments. It has been lying shut for nearly six years owing to both technical and financial issues.

One of the issues has been about who should pay the royalty and cess to the government. Logically, all the four partners should contribute to the payment of these levies, but according to the contract, the government-owned ONGC is to foot the entire bill. The public-sector oil major wants a revision of the terms, but the other partners have been saying no.

However, HOEC is now okay with sharing the royalty and cess and is hopeful of convincing the other partners — for after all, it helps nobody if the field is lying shut.

In a proposal it made to the senior partner, ONGC, in July 2016, HOEC said that a $28-million production recommencement plan will get the field back in production. Daily expenditure will amount to $43,000; the estimated production of 3,000 barrels a day will fetch, at today’s prices, $162,000.

Furthermore, HOEC Managing Director P Elango, speaks of laying a 6 km pipeline linking PY-3 with another gas field called PY-1, which it owns. PY-1 is a gas field that has promise, but only if they manage to drill through hard rock.

At present, PY-1 — HOEC’s only producing asset — produces negligible quantities of gas a day. However, linking PY-3 and PY-1 could boost the fortunes of both the fields. While the PY-3 oil will be collected in a storage facility stationed there, the gas that comes out along with the oil, which would otherwise be flared, will be routed to and aggregated with PY-1 gas.

Elango says HOEC is just two months away from producing gas from its Dirok gas field in Assam. Early next year, the field will yield 20 million cubic feet of gas and 100 barrels of condensates (liquid similar to crude oil). Re-opening the moribund PY-3 will be another booster shot.

Published on January 26, 2017

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