Tuesday, November 26, 2013

ONGC’s Renewed Impetus on Monetization of its Smaller Hydrocarbon Resources

During the last fiscal, ONGC made 22 oil and gas discoveries out of which 14 discoveries were made onshore and 8 discoveries were in offshore fields. In these discoveries, 9 were from the NELP blocks and 13 from the ONGC operated blocks awarded to the company during the nomination regime. The company has been making a steady progress in discovering new hydrocarbon resources which has been elicited by its reserve accretion y-o-y. During 2012-13, reserves accreted by the company from domestic assets stood at 84.84 million tons of oil equivalent from the nomination fields/blocks which was supplemented by noticeable accretion in reserves from its share in PSC fields and blocks which stood at 4.24 million tons of oil equivalent in comparison to 1.31 MMToe (million metric tonnes of oil equivalent) from JV fields in fiscal 2011-12.
Discoveries in Bantumilli South-1 which was a Gas discovery and Vanadurru South-1 which found both Oil & Gas resources have strengthened the prospectivity of the area and have opened up the entire adjoining tract for hydrocarbon exploration in the Krishna-Godavari onland acreage of ONGC. Basement oil and gas discoveries in Madanam-3 (the first hydrocarbon strike in ONGC operated NELP blocks in Cauvery onshore Basin) and Pandanallur-8 which found both Oil & Gas in Cauvery onshore Basin and BH-68 (again Oil & Gas discovery) in Mumbai offshore has given huge impetus to ONGC’s renewed efforts. KG-DWN-98/2-A-2 which found both Oil & Gas resources in the NELP deep-water block KG-DWN-98/2 has given a definite positive fillip to ONGC's efforts towards monetizing discoveries in the Northern Discovery Area (NDA) of this block.

Out of 14 onshore discoveries made during 2012-13, four discoveries (Anklav-9, Motera-36, Mandapeta West-12 & Phulani-1) have already been put on production and one discovery (Mansa-36) is under trial production. Efforts are on for bringing the other discoveries on production at the earliest. One discovery in offshore sector (D1-D-1) has also been put on production.

Production Performance and Upside

The company’s forecasted production volumes will see some upside within the short term period through monetization of its cluster field projects – some of which have already started producing. The rest of these 13 projects are slated to come onstream within the next two years.

ONGC’s crude oil production from its nomination acreages is slated to increase to 24.08 million tons and 24.95 million tons over the next two years backed by the completion of most of its projects that are aimed at monetizing the small and marginal fields – mostly seated surrounding the Mumbai High prolific producing region. The company’s share in joint venture blocks especially the resource rich Barmer block – operated by Cairn, is also expected to give some upside to its share of crude oil production from JV fields in the short to medium term.

Natural gas production upside will be significant from FY15 when almost all of the cluster field projects are set on production with annual volumes expected to reach levels of 25.1 BCM from its nomination acreages. However, gas production from JV fields are soon depleting due to production downslide in Panna, Mukta and Tapti fields.
Cluster Field Projects

Currently, 12 cluster field projects are under advanced stages of execution. Five projects are expected to be completed by the end of the current fiscal. Out of these five projects except the Development of G1 and GS-15 fields in KG Offshore, all other field development projects are located in the Mumbai Offshore area.
The total investment made by ONGC on these projects are over Rs. 34,000 crore and is expected to give a production boost of around 12-13 mmscmd of gas and 4-5 million tons of oil initially with ultimate peak production volumes of close to 22 mmscmd of gas and 7-8 million tons of oil.

Towards realizing the benefits of the cluster field development projects, ONGC has already started producing from B-146 fields with production of around 0.43 mmscmd of gas. D1 fields are also producing approximately at the rate of 18,000 barrels of oil per day while initial production from the North Tapti, C-Series and B-22 fields are 1.35 mmscmd, 1.53 mmscmd and 1.33 mmscmd respectively.

Next in line are B-193 field, additional production from D1 field, BHE field and WO-16 cluster fields which will be brought onstream within the next six months. ONGC has also planned to expedite the development of 6 fields in the Daman offshore area which comprise of C-22, C-24, C-39-A, C-39-1, B-12-7, C-26, C-23, B-12-1 fields. Phase I involved the drilling of 15 wells out of total of 22 wells including all three phases. Phase II and III development has been advanced by 4 years looking at the production upside through the integrated development of these fields.

The integrated development strategy adopted by ONGC has the potential to flip several small/marginal fields which were individually unviable into viable projects for commercial production. As a result of this approach, ONGC will be able to give a fillip to its hydrocarbon production from domestic fields in the short-term till the NELP discoveries further supplement production volumes.

    Infraline Energy Oil & Gas Knowledgebase Team

Monday, November 18, 2013

Can we Decarbonize Growth?

The relationship between energy consumption and economic growth is long-established.  There exists a strong direct link between a country’s power sector and its GDP. This means that as the power sector of a country becomes more developed, its GDP increases and vice versa.  Since 2000, the world energy use has grown approximately as fast as world real GDP, indicating the growing inability of the two to decouple.

Thus it is evident that the economic development of any country irrespective of its size mainly depends upon the development of the power sector. Power is central not only to all household activities, but to economic development as well. In fact it is the fuel of economic progress in all sectors, not only agricultural and industrial but all allied areas. Economic progress depends very much upon how successfully and profitably a country manages its power sector.
If GDP growth and energy use are so closely tied, it will be even more difficult to meet CO2 emission goals than most have expected. Critics argue - that measures to make countries more sustainable would raise the prices of products and make it more difficult for the nations to do business, forcing the Gross Domestic Product downward.  A reduction in emissions is likely to require a similar percentage reduction in world GDP.
On the other hand, some analysts argue that the correlation between energy consumption and growth is not so tight. The linkage between energy use and economic growth can be mitigated by a number of factors, including shifting to higher quality fuels and technological change aimed at increasing the economic productivity and, speci´Čücally, at reducing pollution.

 In 2012, U.S. energy-related carbon dioxide emissions were at their lowest level since 1994, more than 12 percent below the 2007 peak.  The carbon emissions dropped by 3.8% despite a 2.8% growth in gross domestic product. Prior to the last few years, economic growth had been closely tied to increased carbon emissions. In 2009, the sharp drop (7.1%) in CO2 released into the atmosphere was directly attributed to the recession. The US Energy Information Administration identified a variety of causes for the drop in carbon emissions. These included:

Substitution of Natural Gas for Coal in Power Generation: Despite the overall decline in renewables, the carbon intensity of power generation still fell by 3.5 percent, largely due to the increase in the share of natural gas generation relative to coal generation.

A mild heating season: Half of the overall energy decline was from the residential sector, where a very warm first quarter of the year lowered energy demand and emissions. By the end of March 2012, cumulative heating degree days were about 19 percent below the 10-year normal and 22 percent below 2011.

Residential sector electricity consumption was lower in 2012 as compared to 2011.  The residential electricity consumption declining by 3.4 percent, electricity system losses declined even further, (4.8 percent) implying an efficiency increase in electricity generation, transmission, and distribution of over 1 percent.

The transportation sector also contributed to lower energy-related CO2 emissions. Vehicle miles traveled in 2012 were flat compared to 2011 (8,072 million miles per day in both years), while more energy-efficient vehicles continued to enter the market.

Conclusion- Given the constraints imposed by resource depletion and climate change on the long-term sustainability of economic growth, the fundamental challenge remains- Can we sustain economic growth while radically reducing energy consumption and carbon emissions, at the same time? If not, is the continued economic growth sustainable?

{Source:  U.S. Energy Information Administration (EIA); USDA Economic Research Institute data}
                                                                                                                                                        Infraline Energy Power & Coal Knowledgebase Team