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Oil exploration thrust needed

Oil exploration thrust needed
With more than two-thirds of the country’s crude oil being imported at wildly varying rates in the global oil market, India can ill-afford to remain complacent  on this count. As this has potentially deleterious impact on the country’s energy security, the need for stepping up domestic crude oil and natural gas production has assumed weight particularly from the monopoly national oil companies such as the ONGC, OIL and GAIL and a limited number of private players who had of late entered into the fray to make their fortunes through the production sharing contract and the new licensing exploration policy. It is an open secret that even after the nine rounds of bid for oil blocks ever since the NELP was in place in 1999, the results remained none too encouraging with teething troubles trumping any worthwhile gains through the resultant joint-ventures. To compound to the woes, the production sharing contracts have also been bristling with irksome issues that remain yet to be resolved to the satisfaction of the stakeholders. 

Be that as it may, a cursory look at the performance of the national upstream oil company ONGC in the last couple of years should be an eye-opener as to how the authorities have not been concerned about the dwindling of oil production and the equally falling number of oil wells being erected after exploratory surveys by the ONGC in recent years. This is in the face of rising energy demands and escalating import dependence on costly crude within the county even as the economy is projected to grow apace. In response to a written query in the Lok Sabha on 21 February 2014, the Minister of State of Petroleum and Natural Gas Ms. Panabakka Lakshmi said the country’s oil production (including condensate) from ONGC and its joint venture share was 27.279 million tonne in 2010-2011, 26.926 million tonne in 2011-2012 and 26.127 million tonne in 2012-2013. In the first nine months from 13 April 2013 to 13 December 2013, this was 19.524 million tones. So progressively over the past couple of years the national oil company ONGC has not been successful in augmenting its oil production. Similar is the case with ONGC’s natural gas production which has been stagnant at 25,332 million square cubic metres between 2010-2011 and 2012-2013 save for 2011-2012 when it touched 25,507 millions square cubic metres. In the first nine months of 2013-2014 fiscal this was 18,675 million square cubic metres.

In a similar vein and in a more vexatious way, the details of seismic surveys and exploratory drilling by ONGC in its operational areas, in the last three years and in the fiscal year 2013-2014 till 1 January 2014, do not inspire confidence. The wells drilled by ONGC across the country in its operated areas were 125 in 2010-2011, 135 in 2011-2012, 108 in 2012-2013 and 69 in 2013-2014 in the nine months. The reasons for the stagnant trend in production or falling trend in well in the exploration activities are not far to seek as the latest report of the House Panel, laid in Parliament in December 2013, conclusively revealed that the ONGC is meeting its 77 per cent of the rig requirement by hiring from outside at exorbitant cost.  It said the amount spent by ONGC on hiring and leasing of rigs during 2010-2011 and 2011-2012 was Rs 8,682 crore and Rs 8,633 crore respectively which is around 31 and 30 per cent of the actual expenditure out of the annual budget outlay of the ONGC. It is puzzling that while ONGC and OIL have been making consistent bids to acquire new blocks in various rounds of NELP that also entails commensurate drilling activity, these public sector oil companies have seldom realised the need to purchase rigs on their own account instead of hiring them at inordinate costs.

While owning more rigs would minimise the heavy outgo on hiring charges for rigs and help in stepping up production, the House Panel report has bemoaned the inexcusably high idle time for the charter hired rigs of ONGC. It said the principal reason for the idling of rigs is the unplanned capital repair (both offshore and onshore) and waiting time for men and material. 

A report on hydrocarbon exploration efforts of Oil and Natural Gas Corporation Ltd (ONGC) by the Comptroller and Auditor General of India (CAG) said whereas the target for rig down time was fixed at less than 10 per cent of actual rig availability, the audit found that during the period from 2007-2008 to 2008-2011, the non-productive time (NPT) was much higher than the internal norm of the company.  What is worse, as against the global norm of less than five per cent and ONGC’s own norm of less than 10 per cent, the actual NPT of rigs (average of four years) was a whopping 19 per cent. The CAG also lambasted ONGC as its owned rigs were less efficient than the hired rigs.  A comparative analysis carried out by the Directorate General of Hydrocarbons (DGH) showed that ONGC’s drilling performance in terms of average metres drilled per day (well depth/total drilling days) was below the drilling performance of another national oil company, OIL and other private operators, the CAG noted with concern.

The foregoing picture portrayed by both the House Panel report as also the CAG report unmistakably underscores the fact that ONGC has not seriously addressed the important issue of rig usage, reducing the rising hire charges or owning more rigs on its account and other incidental issues such as waiting for men and material when the exploratory drilling is set off. A navratna public sector undertaking and a jewel among the profitable public undertaking such as ONGC should not trot out flimsy pretexts such as undue waiting time for men and material or weather-related aberrations blocking the exploratory works in these days of technologically-driven operations. 

If only ONGC cuts down the non-productive time (NPT) through proper planning and co-ordination in areas such as waiting on men and material, it would amount to increasing of rig count and also saving of additional rig hiring charges estimated at Rs 550 crore per annum. Similarly, a detailed assessment of NPT for each individual rig may throw up some valuable insight.  Moreover, as ONGC’s most of the exploration that is supervening on the Arabian sea coast that is not buffeted by turbulence normally associated with any other coast, the company should put in place processes and systems to make due use of its sparsely available rigs with greater efficiency for efficacious effects. 

In fact the House panel rightly pulled up the company for not being in a position to penalise contractors for idling of rigs and take due action on their own officers for any apathy or lethargy in not supplying men and material on time. When a relatively late starter Brazil had gone way ahead in upstream oil and gas and is all set to overtake the West Asian oil-producing nations in the next two decades, this is the time for introspection for countries like India which had been in the exploratory and production business since the late 1960s. Considering the brittleness with which the country’s energy security is hanging, every small effort would go a long way in improving efficiency in discovery and recovery of the precious black gold from the bowels of the sea so that the future development of the country is safe and secure.  IPA 
G Srinivasan

G Srinivasan

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