Oil & Natural Gas Corp., India’s biggest energy explorer, plans to increase spending on redeveloping its largest oilfield to stem more than two decades of declining output.
“We reached a peak at Mumbai High in 1989,” Sudhir Vasudeva, ONGC’s director for offshore services, said in an interview at his office in New Delhi yesterday. “We won’t reach that level again, but we’re trying to get as much as we can.”
State-controlled ONGC has appointed oil and gas consultant Gaffney, Cline & Associates to advise on redeveloping the oilfield beyond 2012, when a $3.3 billion project is completed, the director said. The next phase may take four years and require higher investment because the cost of services has risen, he said.
ONGC is extending Mumbai High’s life and spending 260 billion rupees to develop smaller fields as it targets a 12 percent output increase in 2013. Oil supply from its domestic fields has stagnated at about 25 million metric tons in the past three years. Bids to acquire assets overseas failed as the Indian company lost out to Chinese rivals, including Cnooc Ltd., in deals worth at least $12.5 billion in the year ended June 30.
“Gaffney will start work next month,” Vasudeva said. “Mumbai High is now declining as the first phase of redevelopment was done in 2001 and the second phase will be completed by 2012. We should have the next dose of investments so we can maintain the plateau.”
A Gaffney spokesman in London confirmed that the oil and gas consultant is working with ONGC on the project.
“There are potentially still large untapped resources under the sea in Mumbai High,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. at Kochi in south India. “The returns can be many times more than the investments if they can continue to extract more from the field.”
ONGC shares climbed 3.3 percent, the most since June 25, to 1,286.25 rupees after the Press Trust of India reported the nation’s cabinet may approve proposals to split the stock and give investors free shares at a meeting today, citing unidentified people with knowledge of the matter. The benchmark Sensitive Index rose 1.7 percent.
Oil production at Mumbai High, 100 miles (160 kilometers) off the coast of India’s financial capital, may increase by as much as 10 percent after ONGC completes the 150 billion rupee ($3.3 billion) project in 2012, Vasudeva said. Annual output at the field, discovered in the 1970s, peaked at 20 million tons two decades ago and is currently 11 million tons, he said.
The smaller oil and gas fields being developed off India’s west coast may start in the next two years and produce 112,000 barrels a day of oil and 11.2 million cubic meters a day of natural gas, he said. That’s about 15 percent of India’s daily oil output in October.
“This will help us offset some of the natural decline,” Vasudeva said. “The seeds that were sown in the past with fructify soon.”
ONGC may increase annual oil output to 28 million metric tons in the year starting April 2013, Vasudeva said Oct. 28. Gas production may climb 67 percent to 100 million cubic meters a day starting April 2015, he said then.
The explorer’s second-quarter net income rose 6 percent to 53.9 billion rupees, missing analysts’ estimates, after increasing provisions for wells that don’t yield oil or gas.
“We are drilling almost one well a day,” he said. “That increases the number of dry wells we drill.”
The explorer finds oil or gas in every three to 3 1/2 wells drilled, Vasudeva said. Globally, the rate is one discovery in every 2 1/2 to three wells, he said.
To contact the editor responsible for this story: Amit Prakash at email@example.com.