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India Continues to Develop Deepwater Projects Off the East Coast

India was the third largest oil consumer and fourth largest liquefied natural gas (LNG) importer in the world in 2017. Domestic natural gas production is forecast to increase by 67% to approximately 6,000 mmcfd in 2023. Upcoming deepwater and ultra-deepwater projects in the Krishna-Godavari (KG) basin at the Bay of Bengal, off the country’s east coast, are estimated to produce around 2,000 mmcfd by 2023.

 

Deepwater and ultra-deepwater fields in the KG basin are forecast to contribute around 33% of India’s natural gas production by 2023, up from 9% in 2017. A number of factors are driving the growth of the deepwater sector. The Indian Government is pushing plans to move the country towards a natural gas-based economy, therefore increasing domestic supply is crucial to meeting the rising energy demand. The government has also introduced a natural gas pricing policy to allow the marketing and pricing freedom for challenging high pressure/high temperature, deepwater and ultra-deepwater projects.

 

The price ceiling for these projects has been raised from US$ 6.17 per thousand cubic feet (mcf) in 2016 when it was introduced to US$ 6.62 per mcf in 2018, allowing companies to make stronger investment cases for these complex developments. Gas price for other fields has risen from US$ 3.11 per mcf to US$ 5.43 per mcf in the same time frame. The commerciality of India’s deepwater and ultra-deepwater developments has been positively affected by the continuing low costs in the service sector. Cheaper drilling contracts, subsea production systems, and associated facilities saw field development costs reduced by at least 20% compared to the initial estimation.

 

These cost reductions are not only opening up new exploration and development opportunities in a relatively underdeveloped region, but are also very important toward creating value from the projects. Success of the deepwater developments will establish the KG basin as one of India’s most important areas, a major shift from ONGC’s traditional offshore assets on the west coast, where the production is set to decline over the next decade. Upcoming KG basin projects are expected to address India’s rising energy demand especially the natural gas needs and reduce the country’s dependency on imports by 10% in 2023.

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