ONGC set for DGH-ordered test to get KG gas going

State-owned ONGC has agreed to conduct tests prescribed by upstream regulator DGH to confirm three key gas discoveries in its Krishna Godavari basin block to end a standoff that stalled its $8 billion project.

The Directorate General of Hydrocarbons (DGH) had not approved Declaration of Commerciality (DoC) for three out of the 11 discoveries ONGC has made in its KG block KG-DWN-98/2 (KG-D5) in the Bay of Bengal. It reasoned that there was absence of surface flow as well as Drill Stem Test (DST) data. Without DoC, ONGC cannot proceed with the developing or bringing the finds to production.

To resolve the standoff, Oil and Natural Gas Corp has agreed to conduct DST on all the three discoveries, company officials said. ONGC proposes to develop the KG discoveries in three clusters - combining finds D and E in KG-D5 block with discovery in neighbouring G-4 block as Cluster-I. All other finds except ultra deepsea UD-1 discovery are to be developed as Cluster-II. The UD-1 find will be developed as Cluster-III. While DGH is agreeable to DoC for the Cluster-II finds, it has not approved the same for discoveries D, E and UD-1 in absence of surface flow data and Drill Stem Test (DST) data. Officials said ONGC has now begun conducting DST on D and E finds. UD-1 discovery alone holds 2.836 trillion cubic feet of inplace gas reserves. Discoveries D and E hold 587.6 billion cubic feet of inplace reserves.

For Cluster-II, DGH has approved 1.42 Tcf of gas reserves and 140.891 million barrels of oil that would require a capex of $6 billion to develop, they said. Cluster-1 would need about $2 billion more. Previously, DGH had refused to recognise D-29, 30 and 31 gas finds Reliance Industries’ KG-D6 block as well as those in NEC-25 block in absence of a DST. RIL issue is yet to be resolved.

Officials said KG-D5 is divided into Northern Discovery Area (NDA) and Southern Discovery Area (SDA). Estimated reserves of NDA are 121 million tonnes of oil in place and 78 billion cubic meter of initial gas in place, and that of SDA are 80.9 bcm of initial gas in place. 

ONGC plans to develop the discoveries in the block in three clusters -- 14.5 million standard cubic meters per day of gas for 15 years from Cluster-1 comprising of D&E finds of NDA in KG-D5 block and G-4 find in the a neighbouring area. Cluster-2A mainly comprises of oil finds in NDA which can produce 75,000 barrels per day (3.75 million tons per annum). Cluster 2B, which is made up of four gas finds in NDA, envisages a peak output of 14 mmscmd of gas, with cumulative production of 32.5 bcm of gas in 14 years.

On Wednesday, the Government confirmed the appointment of Dinesh K Sarraf as the chairman and managing director of ONGC.