KG Basin regaining its lost glory: ONGC to start flowing oil soon

In 2024 the Krishna Godavari Basin, which lies off the Andhra Pradesh coast, may just regain some of its lost glory in the country’s hydrocarbon space. Anytime now the public sector oil and gas giant, ONGC, will commence oil production from its flagship deep water project KG-98/2 Development Project. Gas production from the Project has already commenced in March 2020 with the plan of further ramping up by May 2024.

Though the initial buzz was that the oil would follow from the project in December itself, but sources said, some technical issues are being worked at.

The KG-DWN-98/2 is adjacent to Reliance Industries-BP’s famous KG-D6 block. ONGC is the operator of the block KG-DWN-98/2, which consists of three clusters of discoveries—Cluster I, II and III.

In Cluster II, commercial production from one gas field has already commenced from March 2020 and crude oil production is scheduled for May 2024, Minister of State for Petroleum & Natural Gas Rameswar Teli said in a written response to a question in Rajya Sabha recently. But the PSU was confident of starting the production before time.

Cluster development

Asked If this includes the ultra-deep water well or if is this just one of the Clusters which was being worked at, an official told businessline that “This does not include production from the ultra-deep well. Production shall be from Cluster-II of KG-DWN-98/2 Block.” There will also be associated gas production, the source added.

Teli had informed that “In Cluster-III, there is one ultra-deepwater gas discovery, which would be the second deepest hydrocarbon discovery in the world when monetised. The FDP is scheduled to be submitted by January 2026.” A Field Development Plan (FDP), outlines how a company intends to develop a petroleum field, manage the impact on the environment and society, as well as forecasts for production and costs.

Regarding who were the buyers of this oil, the source said “Crude oil will be marketed on arm’s length basis. All domestic refiners (OMC/private) are prospective buyers.” On what price will the oil be sold — whether it is benchmarked to Brent, the source said, “the price of this crude oil will be linked to international benchmark crudes like Dated Brent depending on the prevailing market conditions.”

Production plans

ONGC proposes to start producing from 3 to 4 wells initially and the initial production could be 8,000 to 9,000 barrels per day. According to the source, the first oil consignment will be to the subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL). Peak oil output is pegged at 45,000 barrels per day.

It is estimated that about 2 mmscmd of gas would also flow with oil. ONGC had said the estimated capital expenditure would be $ 5.07 billion and operational expenditure would be $ 5.12 billion over a field life of 16 years. According to ONGC, Block KG-DWN-98/2 is an offshore project with challenging geology.

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