ONGC struggles with onshore oil, gas output

ONGC is facing a tough challenge to produce more oil and gas from its onshore fields, as the government-owned explorer is unlikely to meet its target from on-land fields in 2015-16.

Sources told FE that crude oil output from onshore fields of ONGC are likely to hover at 5.8 million tonne (MT) in FY16, 5% lower than the target for the year. Similarly, gas output from on-land fields are likely to touch 4.7 billion cubic metres (bcm), nearly 12% below the target of 5.36 bcm in the current fiscal year.

This is not the first time ONGC has seen its output reducing from onland fields. For the past more than five years (see table), both crude oil and natural gas production has been falling. The continuous drop in output is primarily because the government-owned explorer is not able to put on stream any new fields on production in its onshore acreages.

ONGC operates nine onshore assets that are spread over Assam, Tripura, Mehsana, Ahmedabad, Ankleswar, Cambay, Karaika, Cauvery and Rajahmundry.

“The global natural rate of decline in production in around 7-8%. However, at ONGC fields, it has been restricted at 3-4%,” said a senior ONGC official, adding that the explorer is deploying all advanced technologies such as hydro fracking, well stimulation, and the latest improved oil recovery (IoR) and enhanced oil recovery (EoR) techniques to boost output.

ONGC’s offshore fields are showing a fair performance, thereby helping the explorer reverse an eight-year trend by reporting a higher output in FY15. The trend is likely to be continued in the current financial year.

The PSU is banking on the better performance its assets in the western offshore region. In FY15, crude oil production from the western offshore fields, which contribute about 70% of the explorer’s total domestic production, averaged at about 3,27,500 barrels of oil per day (bopd) in March, which was the highest production rate from the western offshore since 2008.

In order to ramp up output from onshore asstes, ONGC has contemplated opting for ‘service contracts’. This is expected to help reverse the trend of falling output. In this model, popular mostly in West Asian oil-producing nations, the fields are handed over to firms which offer a fixed rate of return to the owner of the asset. However, no action has been announced by the explorer till now.