ONGC to invest $4.5 billion in 2-3 years to boost output from mature fields

ONGC reported a decline of 3.3 percent in crude oil production in the third quarter of FY24.

Oil and Natural Gas Corporation (ONGC) plans to invest $4.5 billion in the next two to three years to reverse an output decline from its mature fields, Pankaj Kumar, director (production), told Moneycontrol.

“We have devised several enhanced oil-recovery schemes and have also started seeing positive results out of it. We intend to bring up these schemes in the next two to three years and it is going to involve investment of over $4.5 billion in west coast only. So, it's a huge investment. This investment will produce around 60-70 million tonnes of additional oil and oil equivalent gas,” said Kumar.

India’s energy demand growth is among the highest in the world currently. But the country’s largest oil and gas explorer has been unable to boost output due to a natural production decline from its domestic assets and the dearth of big discoveries.

ONGC aims to reverse the decline in FY25 with a two-pronged strategy - scaling up output in new blocks in the Krishna Godaveri basin and by improving production efficiency in mature fields.

“It is difficult to produce from mature fields and as such we do not have any big discovery either in onshore or Western offshore for quite some time. We are working on enhancing production as well as enhancing the ultimate recovery from the fields,” Kumar said.

ONGC's crude oil production fell 3.3 percent to 5.2 million tonnes in the third quarter of FY24, while gas output dropped 4.3 percent to 5.1 billion cubic metres. In the nine months ended December, its crude oil output declined 2.9 percent to 15.78 million tonnes and gas production went down 3.4 percent to 15.5 billion cubic metres. The company cited various reasons for the lower production, including the natural decline from mature fields.

However, ONGC is optimistic about improving output in FY25 with production set to start at its deepwater block in the Krishna Godavari basin. Kumar said installation activities would be completed by early May and peak production from the block would be reached by the end of 2024.

Overseas production

According to ONGC’s Energy Strategy 2040, the company aims to double its oil and gas production from domestic and overseas fields by 2040. Apart from ramping up domestic production, Kumar said ONGC Videsh—the overseas arm—is looking for opportunities to help meet the output target.

“OVL continually explores potential oil and gas-rich nations, actively seeking lucrative opportunities where existing players are divesting their shares or governments are seeking partnership. With this purpose, they meticulously evaluate opportunities, holding exploratory assets,” he said.

The official added that OVL’s Russian assets have the highest potential and normal production there has resumed. Amid the Russia-Ukraine war, production from Russia’s Sakhalin—where OVL has a 20 percent stake—had declined.

“The Russian assets are the highest producing assets, though there is a little bit of challenge considering prevailing conditions. But in the last 12 or 14 months, things have been ironed out. The biggest field, Sakhalin, where production went down drastically initially when the problems started... it has again come to normal,” he said.

Kumar said Mozambique is also a good opportunity as gas production can be ramped up from there.