ONGC Set to Commence Oil Production from $5 Billion Deep-Water Project This Month

Oil and Natural Gas Corporation (ONGC), under state control, is poised to initiate oil production from its long-awaited flagship deep-sea project located in the Krishna Godavari basin in the Bay of Bengal. Despite facing delays, the much-anticipated project is expected to reverse years of output decline, as stated by a senior company official.

Pankaj Kumar, ONGC Director (Production), announced the imminent commencement of oil production from the Cluster-2 project in the KG-DWN-98/2 block later this month. The project, situated in the treacherous terrain of the KG deep sea, has faced numerous delays, with the impact of the COVID-19 pandemic being a significant factor.

The floating production unit, known as the FPSO (Floating Production, Storage, and Offloading), named Armada Sterling-V, is already positioned in the block. ONGC has informed Shapoorji Pallonji Oil & Gas (SPOG), the contractor, that the FPSO is prepared to receive the first oil this month.

Initially scheduled for oil production in November 2021, the Cluster-2 project faced setbacks due to pandemic-related disruptions. Kumar outlined the plan to commence production from 3 to 4 wells initially, gradually connecting others, with an initial production estimate of 8,000 to 9,000 barrels per day.

The KG deep sea poses unique challenges, and ONGC is mindful of avoiding the pitfalls experienced in the neighboring KG-D6 block of Reliance Industries. While gas production in the area is less complex, careful management is required to prevent issues such as sand and water ingress in wells.

ONGC plans to ship the first consignment of crude oil to its subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL). The crude will undergo testing to determine its grade and pricing.

The FPSO Armada Sterling-V, owned 70 per cent by SPOG and 30 per cent by Malaysia's Bumi Armada, has been awaiting oil since January 2, 2023. ONGC has revised its deadlines multiple times, emphasizing the complexity of the reservoirs and the need for thorough preparation before production begins.

The Cluster-2 project comprises 13 wells that will eventually be connected to Armada Sterling-V, with peak oil production expected to reach 45,000 barrels per day in 2024-25. Gas production is anticipated to start in May 2024, with an estimated output of 7-8 million metric standard cubic meters per day (mmscmd).

Despite the revised production estimates being lower than initially projected, ONGC remains optimistic about the project's contribution to arresting the decline in crude oil production in the next fiscal year, while anticipating a rise in natural gas output. The KG-DWN-98/2 block, located next to Reliance Industries' KG-D6 block, has multiple discoveries organized into clusters, with Cluster-2 being the first to undergo production.

BS