IN November last year, N.K. Singh, economic pointman in the Prime Minister's Office (pmo), wrote a brief note to Ram Naik, urging the petroleum minister to evaluate proposals sent by a handful of global oil and gas majors interested in partnering Oil and Natural Gas Corporation (ongc) for its $2 billion Bombay High redevelopment project. Singh was worried, the cause being dwindling production from the Arabian Sea oilfield and continued criticism that the state-owned monolith has been able to extract only 18 per cent oil (300 million tonnes) since its discovery in 1974.
Last week, the government cleared the $640-million first phase of ongc's ambitious project to rejuvenate Bombay High and raise output. ongc hopes to reap another 12 to 14 per cent oil from the 1,600 million tonne-Bombay High reservoir—which accounts for more than 40 per cent of ongc's total 5,00,000 barrel-a-day output—through the redevelopment plan that is expected to show results by 2003.
Vinod Kumar Sharma, ongc regional director in charge of Bombay High, admits the redevelopment plan is key to the corporation's future as failure could have serious consequences for the nation's oil pool account. But he disagrees with the belief that diminishing yield from Bombay High is due to reckless exploitation of the oilfield in the '80s with little thought for long-term consequences. The oilfield, which stretches 75 km long and 25 km wide and has often been thought of as India's answer to Britain's North Sea oil deposits, was producing 4,00,000 barrels per day in 1985, a trend it maintained till late 1990. Today, ongc's daily output stands at about 2,20,000 barrels of oil and 10.5 million cubic metres of associated gas. "It was a different situation that time and a host of factors contributed to the scenario," says Sharma. "First, the development was not conceived in its totality, and ongc worked on piecemeal operations since it had no prior experience. There was shortage of hard currency to import technology and equipment. Then, we had this pressure of import substitution."
But other ongc officials Outlook spoke to did feel that during the '80s, they often had to obey orders from senior bureaucrats of the pmo and the petroleum ministry to pump more oil at any cost, especially when New Delhi struggled to cope with high costs of imported crude. Sharma agrees but says the oilfield was not flogged to an extent it would cause migration of oil. "I can assure you Bombay High is also not in such a desperate situation as some of the global oil giants think. Such things—low and increased output—always happen with an oilfield."
Officials at the Directorate-General of Hydrocarbons (dghc) agree. They say that if compared with recent exploration and production in the North Sea oilfields, Bombay High has done quite well despite disadvantages. For example, Bombay High continues to have a very shallow incline with more than 20 layers as compared to the North Sea fields which have barely five to six layers. So, ongc has to drill far more often. Sharma says ongc is not looking at any foreign partner but one could be called in at a later stage. Officials, however, revealed that several global giants, including Unocal, Occidental Shell, have in the past shown interest in acquiring stakes in Bombay High. The last named was even encouraged to submit a preliminary proposal but the pmo and the petroleum ministry vetoed the offer. Later, ongc conceived a redevelopment plan with consultants Gaffney Cline & Associates.
The plan comprises two projects—Bombay High North (bhn) and Bombay High South (bhs). The bhn plan will be spread over the next three to five years while the bhs plan will be ready by early 2002 (involving an additional $1.2 billion investment). "We're not short on cash reserves and will finance the entire scheme ourselves. There'll be no external borrowings," Sharma says. If all goes well, ongc believes Bombay High could be used for another 40 to 50 years. The complete revamp will increase ongc's oil output by 50 per cent from the current status.
And so the stage is set for one of the largest projects ever in India's energy sector.
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