Indian state-controlled upstream firm ONGC is facing indefinite delays to starting production from deepwater areas in the Krishna Godavari (KG) basin off the east coast, potentially adding to the country's LNG dependence.
ONGC started test production of 240,000 m³/d in February from the KG basin and started supplies to state-controlled gas distributor Gail. It plans to drill more wells and start commercial production later this year.
ONGC had set a minimum reserve price of $5.60/mn Btu for 750,000 m³/d of gas over a three-year period from the KG basin but it is unclear if Gail is paying that much. ONGC officials declined to comment on how much Gail paid. New discoveries in deepwater areas off the east coast cost upwards of $5/mn Btu to extract.
ONGC originally targeted 3mn m³/d from the KG basin by next March, peaking at 16mn m³/d in 3-4 years, with peak oil output of 80,000 b/d. But a six-month lockdown to combat Covid-19 since 25 March has led to an uncertain schedule for future output, company officials said. India's gas production in the April-June quarter fell by 14pc from a year earlier to 5.54bn m³.
ONGC's capital expenditure for the 2020-21 fiscal year is expected to be 300bn rupees ($4.1bn) but Covid-19 will delay projects and reduce its spending. International supply chains have been affected and equipment suppliers and contractors from Europe have declared force majeure, senior company officials said. Discussions with suppliers are continuing but there is no timeline on when the equipment will arrive, they added. Several foreign staff working at the KG site are also not returning to India unless Covid-19 infections are controlled.
ONGC is spending more than $5bn to produce as much as 35bn m³ of gas by 2023-24 from new KG deepwater projects. The pandemic has also delayed output from Indian private-sector conglomerate Reliance Industries and BP's KG projects.
