Bid & Tender


ONGC Faces More Delays in Deep-water Development

A flagship $5 billion-plus deep-water development project that India’s state-owned Oil & Natural Gas Corporation (ONGC) is planning in the Krishna Godavari basin is facing fresh delays due to key elements running behind schedule.


Several people familiar with the deep-water project said that ONGC’S KG-DWN-98/2 oil and gas development off the east coast, which involves the Cluster-2 region, is to be delayed by “several months”. Four key elements of the giant KG basin development are behind the delays.


One element covers supply of a central processing platform with living quarters, while a second covers an integrated subsea production system and subsea umbilical riser and flowlines. A third element covers a leased floating production, storage and offloading vessel, while the fourth covers onshore processing facilities.


Project watchers said that all four elements of the KG-DWN-98/2 developments are facing delays in the wake of coronavirus restrictions, engineering changes and project execution challenges. While ONGC was expected to kick-start gas production from the new deep-water facilities during the April 2021 to March 2022 financial year, it now expects first oil by December 2022 and overall project completion by May 2023.


CPP challenges


One person said the offshore CPP and living quarters facility, to be supplied jointly by India’s Afcons and Malaysia’s Sapura Energy, is the element facing most execution challenges. “The CPP is running way behind the original schedule,” one source said, suggesting Sapura’s financial difficulties were exacerbating the issues on the offshore facility.


A second person corroborated the view that the CPP is likely to be delayed and suggested that ONGC is considering bypass options to shift production flows and avoid further delays to the flagship offshore platform.


More delays


The combined SPS and SURF project being executed by a grouping of US giants McDermott International and Baker Hughes and with local player Larsen & Toubro (L&T) is also affected by delays, as is the FPSO lease contract being handled by a consortium comprising India’s Shapoorji Pallonji Oil & Gas (SP Oil & Gas) and Malaysia’s Bumi Armada, as well as the onshore processing facility being executed by domestic player Tata Projects.


Limited experience


Another project watcher questioned whether ONGC's limited experience in handling large scale deep-water projects may have played a part in the project management issues now emerging.


ONGC, while acknowledging the delays with the development, said that the “work packages comprise of supply chains which are predominantly based across the globe in countries like Malaysia, Singapore, Europe and US”.


“Since the onset of Covid-19 pandemic in February 2020, several nations across the globe imposed lockdowns resulting in supply chains disruptions and restrictions on the movement of personnel, which heavily impacted project completion timelines,” ONGC said.


The company added that it has “already commenced gas production from the (KG basin) block in March 2020” by tying back to its existing deep-water facilities on the east coast.


Huge investments


ONGC is spending more than $5 billion on the Cluster-2 development and plans to produce more than 16 million cubic metres per day of gas and an additional 78,000 barrels per day of oil at peak. In October 2018, McDermott, Baker Hughes and L&T were jointly awarded a $1.69 billion engineering, procurement, construction and installation contract for the subsea scope of the project on the KG-DWN-98/2 asset.


The integrated contract — the biggest-ever subsea award by ONGC — included the supply of all SPS, including 26 deep-water trees, and the installation of subsea umbilicals, risers and flowlines in water depths of up to 1300 metres.


More clusters targeted


In addition to the Cluster-2 area, ONGC has been planning to launch the development of the KG-DWN-98/2 block’s Cluster-1 and Cluster-3 regions. At peak, the deep-water asset is expected to add more than 35 MMcmd of gas production and 77,000 bpd of crude, when all key clusters are brought on stream. KG-DWN 98/2 lies offshore the Godavari River delta in the Bay of Bengal. It is located 35 kilometres offshore the state Andhra Pradesh in water depths ranging from 300 to 3200 metres.


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