GSPC’s Origin & Major Discoveries

Gujarat State Petroleum Corporation (GSPC) is the flagship concern of the GSPC Group. The Rs. 3900 crore company is involved in exploration and production of hydrocarbons in India and abroad.

In 1994-95, GSPC acquired several oil and gas fields in the first and second rounds of bidding introduced by the Government of India. It was also among the first companies of the country to participate in the NELP bidding process and acquire exploration blocks across the country.

In 2005, GSPC made one of India’s largest gas discoveries in the KG basin. Among other considerable accomplishments, GSPC stands out as the builder of the nation’s only land-based drilling platform.

In little over a decade, the company has grown from a small-time operator in Gujarat’s oil fields to a comprehensive hydrocarbon E & P company with an impressive national and international portfolio.

The MoU between Oil and Natural Gas Commission (ONGC) and international energy major, Shell Exploration Company BV, features broad areas of co-operation.

The sphere of upstream co-operation includes investigation of increasing and enhancing production from existing producing fields in India, joint bidding in NELP and other similar rounds, developing Indian exploration blocks, joint participation in international upstream ventures and evaluation of a joint project for coal gasification facilities in India.

The subject of downstream co-operation includes evaluation of the hydrocarbon supply chain, joint business opportunities in the areas of marine fuels and lubricants as well as refineries and petrochemicals.

Identification and evaluation of joint business opportunities in the field of coal bed methane applications, monetization of currently stranded ONGC hydrocarbon resources, co-operation in the development of renewable energy resources and provisions relating to technology and consultancy services regarding inspection, maintenance, Health, Safety and Environment Management (HSE) and energy efficiency and loss control are some of the other contents of the MoU.

In 2006, Oil and Natural Gas Corporation (ONGC) struck natural gas in ultra-deepwater well UD1 in the Krishna-Godavari block KG-DWN-98/2.

However, this gas discovery in the Krishna-Godavari basin (KG basin) was disallowed by the Directorate General of Hydrocarbons (DGH) as ONGC had abandoned the well. Besides, according to the norms laid down by the product-sharing contract (PSC), if the gas does not flow to the surface, like in this find, it cannot be considered to be a discovery.

ONGC was to contest the DGH views and ask for a third-party audit. According to the company, it was carrying out its activities in the New Exploration Licensing Policy (NELP) blocks in accordance with PSC norms.

In adherence to the norms, in the well UD-1, block KG-DWN-98/2, ONGC notified DGH regarding modular dynamic test (MDT) in the interval 5,243.5 – 5,304 m, which was conducted in the presence of a DGH representative during December 7-15, 2006. The interpreted presence of hydrocarbon was validated through this test.

The company claimed that it had duly informed the DGH of the presence of Non-Associated Natural Gas (NANG) on 23 December 2006. ONGC, in consultation with its partner Cairn Energy India Ltd, submitted its potential commercial interest, meriting appraisal, in the prescribed format to the DGH.

ONGC in KG Basin

Oil and Natural Gas Corporation (ONGC)–operated G1 and GS 15 fields in the KG basin are both predominantly gas fields. GS 15 will start production from April 2010 and G1 from April 2011.

G1 is located 28 kilometers off Amalapuram coast in water depths ranging from 135 to 500 meters, while GS 15, in shallow waters, is located 5 kilometers from the coast in the KG basin.

At their peak, the two fields are expected to cumulatively produce two million standard cubic metres per day (mmscmd) of gas for about 7 years, after which production would decline.

ONGC expects a production of 0.982 million tonnes (MMT) of sweet or low-sulfur crude and 5.92 billion cubic metres (bcm) of gas over a period of 15 years from G1 and GS 15. At present, the fields produce about 400 barrels of oil per day.

ONGC Oil & Gas Discoveries in KG Basin

In March 2005, Oil and Natural Gas Corporation (ONGC) made a significant gas discovery in its “Sagar Samriddhi” Deepwater Exploration campaign at location VA-1A in Block No. KG-OS-DW-IV in the KG basin. The well was completed to target a depth of 2449 meters. The presence of gas was confirmed through log evaluation and wire-line testing.

Cumulatively, ONGC has established about 130 million tons of oil and oil-equivalent gas in-place in KG Offshore.

State-run ONGC had announced that these finds would be brought into production through integrated development with nearby GS-29, G-1 and GS-15 structures.

It is a well known fact that India’s gas consumption is increasing in leaps and bounds by the day. Additionally, the rapidly growing nation’s potential future demand is also expected to show an upward rise. To enumerate just a few chief sources of demand for hydrocarbons in the country, let us take a brief look at some of the major sectors.

Needless to say, the power sector would be the biggest consumer of hydrocarbons. Being an agrarian economy, the fertilizer sector would also use up large quantities of gas.

In urban areas, most major residential and commercial cities are being piped for domestic gas delivery. Transport networks within such cities would consume gas too.

Undoubtedly, rapid domestic increase in gas production would completely transform India’s economy. The less expensive domestic gas would result in lower energy costs, improved trade balances and cleaner energy.

The hydrocarbon-rich Krishna-Godavari (KG) basin promises to deliver India’s energy dream.

In 1999, the Government of India launched the New Exploration Licensing Policy (NELP) to expedite the pace of hydrocarbon exploration in the country. NELP I was launched in January 1999 and was closed in August of the same year. 24 of the 25 blocks on offer were awarded. The world-famous Reliance Group gas discovery is on a block the firm acquired in this licensing round.

In the last decade, seven rounds of NELP have been concluded, significant details of which reflect in the table below.

Source : Ministry of Petroleum & Natural Gas

At least 68 oil and gas discoveries have been made by private and joint venture companies in 19 blocks. These have added more than 600 MMT of oil-equivalent hydrocarbon reserves to India’s credit.

Concluded in 2008, the seventh round of NELP resulted in 181 bids from 95 companies, including 21 foreign companies. Since NELP VII, the bid evaluation criteria (BEC) have been changed to favor companies experienced in deep-sea exploration and production. Conversely, the criteria for onshore blocks have been relaxed to make almost anyone eligible for deep-sea. Apparently, the idea is to encourage domestic companies to tie up with experienced foreign players.

As on April 1, 2009, investment commitment under NELP is about US$ 10 billion on exploration and US$ 5.2 billion on development of discoveries. The actual expenditure on exploration so far has been about US$ 4.7 billion.

In 2002, the D-6 block of the KG basin made global headlines when Reliance Industries made the world’s largest gas discovery of the year there.  Besides, India has been rewarded with a number of significant gas discoveries in recent years which could potentially transform the country’s energy landscape.

However, it was not always smooth sailing for enthusiastic Indian oil explorers. With an astounding annual average growth rate of  6-7% compared to the world average of 1.54%, India’s need for petroleum products was growing in leaps and bounds. In June 2009, the country was the 11th-largest consumer of hydrocarbons and was forecasted to be the 5th-largest in the next 2 decades. Oil consumption was expected to grow from the current 2 million bo/d to 3.2 million bo/d by 2010. Since India imported at least 70% of its hydrocarbon requirements in the mid-1990s, the Government realized the urgent need to tackle the issue of its energy needs and responded by a drastic overhaul in the petroleum sector.

Realizing that an increased level of exploration activity supported by large-scale capital investment was necessary to expand domestic exploration and production, the Government formulated the New Exploration Licensing Policy (NELP). Approved in February 1997, many of the exclusive privileges of the two national oil companies, ONGC and OIL, were withdrawn with the ambitious goal of developing a more competitive environment in the hydrocarbon sector.  As a result, instead of obtaining exploration licenses on a nomination basis, these PSUs had to lock horns with private sector companies for them. For the first time, a level playing field was established between private and public companies in the petroleum sector.

The KG basin has proved to be as unique as it is fertile. The oil and gas here are submerged in history through the ages. From the oldest Mandapeta sandstone sediment of the Permo-Triassic Age to the youngest Godavari clay of the Miopliocene Age, from Paleozoic and Mesozoic sediments in the west to Upper Mesozoic/Cretaceous and Tertiary sediments in the east, explorers have uncovered deposits as young as 5 million to as old as 250 million years of age!

A peculiarity in geology, the basin’s geographical distribution is very wide and it extends from onshore to offshore in a single unit, with more gas concentration onshore and more liquid concentration offshore. Hydrocarbons are found in dispersed cavities and both volcanic rock and limestone reservoirs have been discovered here.

Thanks to its geological complexity, most wells drilled into this basin are considered to be exploratory in nature and 90% of its production has come from these instead of from wells drilled for production. Yet, while the average success ratio of drill is to hit on a global scale is nothing less than 1:6, the KG basin has delighted explorers with a consistent average ratio of 1:2.5.

When you think of Matsyapuri, the Abode of Fish, perhaps you would imagine a quiet, languid, settlement on the shore of a tranquil sea where you could lie down on fragrant grass with the blue sky above and birds circling overhead, with the freedom to drift off into sweet daydreams. And you would not be too far from the truth. However, at the neighboring Matsyapuri-2, men in orange overalls indulge in a different kind of fishing – one that is not at all out of a fairytale. For at this particular location in Andhra Pradesh, these men are scouting for hydrocarbons.

About 16 km from Naraspur, Matsyapuri is a part of the Krishna-Godavari basin (KG basin), one of the first sites explored by the Oil and Natural Gas Commission (ONGC) of India. The basin spans the coastal districts of East Godavari, West Godavari and Krishna in Andhra Pradesh. It extends over 28000 sq km onshore, 24000 sq km in shallow waters and 18000 sq km in deep waters.

The journey of exploration began in April 1977 when ONGC began prospecting for oil and gas in the basin. In 1978, it drilled its first well near Naraspur and discovered gas there. Since then, it has struck black gold time and again in the rather lucrative basin.