The state-owned Oil and Natural Gas Corporation (ONGC) is set to begin crude oil production from its deep-water project in the Krishna Godavari Basin next week. This production is expected to save India nearly Rs 11,000 crore per year, as the country currently imports 85% of its crude oil and half of its natural gas. ONGC also plans to invest Rs 1 lakh crore in petrochemical projects by 2028-2030.
The movement in the KG Basin is considered significant by officials in the Ministry of Petroleum and Natural Gas (MPNG). The production from this deep sea asset is expected to boost ONGC’s output and address the low production levels that have been concerning the state-owned company.
Astrologers have noted that the period between November 20 and November 26 is a favorable time for projects in India, with new opportunities likely to arise.
The increase in domestic oil production will also help reduce the outflow of foreign exchange spent on importing crude oil. At the current Brent crude price of $77.4, this output alone will save Rs 29 crore every day or a staggering Rs 10,600 crore annually.
Initially, oil production from the basin was scheduled to start in November 2021 but faced several delays. The KG-DWN-98/2 block, located 35 km off the coast of Andhra Pradesh in the Bay of Bengal, has multiple discoveries that have been grouped into clusters. Cluster-2 will be the first to begin production.
In addition to crude oil, 7-8 mmscmd of gas will start flowing from the KG Basin from mid-2024. ONGC plans to utilize 75 rigs for this project and aims to start production from three to four wells initially, with a daily production of 8,000 to 9,000 barrels. The company plans to drill 541 oil wells in FY24, compared to 461 wells drilled in the previous fiscal year.
The production from the KG-DWN-98/2 block will contribute to India’s domestic production and reduce its reliance on imports to some extent. Currently, India produces approximately 600,000 barrels of oil per day, and at its peak, the cluster-2 project will account for 7% of the country’s output.
A top ministry official stated that the peak oil production of 45,000 barrels per day is expected to be reached in FY 24-25. This will make it ONGC’s third most productive offshore asset after Mumbai High and Bassein & Satellite fields on the West Coast.
With a combination of increased output and enhanced recoveries, ONGC’s oil production is projected to reach 25 million tonnes in FY25, compared to 21.5 million tonnes in FY23.
ONGC has been experiencing a decline in crude oil output due to the maturity of its assets. However, the commencement of production from new assets like the KG block is expected to reverse this trend. In Q2, ONGC’s consolidated net profit increased by 142.4% to Rs 16,553 crore.
Earlier, ONGC had announced plans to bring in an equity partner in ONGC Petro additions Limited (OPaL) by the financial year 2026-2027. The company aims to infuse Rs 18,365 crore into OPaL and make it a joint venture with GAIL (India) and Gujarat State Petroleum Corporation Limited (GSPC).