massive deepwater natural gas discovery off the eastern coast of
India is in itself impressive. But the impact it could have as India
strives to expand production to meet the growing demand in this
populous country makes its significance even more profound.
Group, India's largest private sector company, and its partner,
Canadian independent Niko Resources, announced October 31 a world-class
giant deepwater gas discovery 20 kilometers offshore in the Krishna
Godavari Basin on block KG-DWN-98/3.
stands as the biggest gas find in India in three decades, and was
among the world's largest gas discoveries in 2002. Reliance hopes
to have the field in production by the middle of 2004, with daily
production of up to 1.44 bcf.
significant part of the story: This is the first ever discovery
by an Indian private sector company.
bearing structure lies in an average water depth of 900 meters and
is 1,850 to 2,200 meters subsea, according to information released
by Niko Resources, which holds a 10 percent stake in the 1.9 million-acre
block. Niko has assembled a portfolio of prospective lands in the
Asian subcontinent -- particularly India, a region with high energy
requirements and limited supply.
seismic and a recently completed four-well drilling program at the
time of the announcement indicated an anomaly of about 177 square
kilometers and a hydrocarbon column of 342 meters.
well has been completed since the announcement, according to Reliance.
tests were conducted on two wells and resulted in equipment-constrained
flow rates of 40 million cubic feet of gas a day and 29 million
cubic feet of gas per day. Individual well deliverability should
exceed 100 million cubic feet daily, the firm said.
well was drilled to a total depth of 2,900 meters in mid-May, and
9-5/8 inch casing was set to approximately 2,200 meters. A second
well was spudded in June by Transocean's Discoverer 534 drillship
in 1,340 meters of water. Details on additional wells have not been
estimates gas in place at over seven trillion cubic feet, and recoverable
reserves at over five trillion cubic feet. However, integrated 3-D
seismic and well interpretation indicates that the reserves could
be significantly higher. In late 2002, DeGolyer and McNaughton was
preparing an independent engineering report that should verify reserve
plans 25 development wells.
NELP For Their Friends
Field discovery came on the first well drilled in the deepwater
block off the Andhra Pradesh coast. It came just 20 months after
the receipt of exploration licenses covering the block.
been working to expand its domestic upstream industry in recent
years, said Ian Blakeley, regional manager of the sub-continent
for IHS Energy. Imports account for about 70 percent of India's
energy consumption while only six of the 27 basins in the country
have been explored, according to Niko.
late 1990s India realized it had to increase its indigenous production
and attempt to move toward self-sufficiency," Blakeley said. "At
that time the country drafted the New Exploration Licensing Policy,
or NELP, which broke away from the long-standing tradition in India
of going through a series of inconclusive licensing rounds that,
because of the bureaucracy, remained pending for years and years."
rounds have been held under the new policy with a fourth planned
later this year.
was launched in January 1999 and was closed in August of the same
year. Twenty-four of the 25 blocks on offer were awarded. The Reliance
Group discovery is on a block the firm acquired in this licensing
was launched in December 2000 and completed in March 2001. All 23
blocks offered were awarded. NELP III was launched in March last
year and closed in August. Twenty-seven blocks were offered under
this round and in November the Cabinets Committee on Economic Affairs
cleared the award of the 23 blocks that received bids.
government has worked hard to generate interest among international
oil companies for its licensing rounds, but with limited success.
The government has conducted road shows in London, Houston, Calgary
and Singapore to promote the acreage.
licensing round has generated little interest from the major international
firms," Blakeley said. "I think this lack of interest is generally
due to a widely held perception that India has relatively low hydrocarbon
potential and is a risky venture, particularly in deep water. These
companies would rather invest in known producing deepwater regions
than a risky venture in India.
or not the recent discovery by The Reliance Group will redress this
imbalance and change the attitude toward India remains to be seen,"
he added. "I think this giant discovery will make people sit up
and think more generously about what India has to offer."
NELP licensing round is scheduled to launch in April.
independent international firms, however, have staked claims in
India and that investment is starting to pay off for some. Blakeley
said a great deal of seismic data has been shot over the acreage
awarded in NELP I and NELP II and drilling has gotten under way
in recent months.
Cairn Energy, aggressive in the early licensing rounds, drilled
a series of wells in 2001 on a Krishna Godavari block that is to
the southwest and adjacent to the Reliance block where the giant
discovery was made.
six wells on the KG-DWN-98/2 block during 2001 -- five discoveries
and one appraisal well. The firm estimated gross unrisked reserves
of at least 200 million barrels of oil equivalent for the block.
the wells were gas discoveries and two were oil and gas finds. One
well was a small, sub-commercial oil and gas discovery.
success first highlighted the potential of the Krishna Godavari
Basin and, of course, that has been continued with the Reliance
Group discovery right next door," Blakeley said.
picked up 12 exploration blocks in NELP I and another four in NELP
is actually a petrochemical firm with an oil and gas division, but
when the changes were made with NELP the company decided to expand
its oil and gas operations.
the firm reportedly acquired more than 10,000 kilometers of 2-D
seismic and 5,800 square kilometers of 3-D seismic over its NELP
I acreage position, and last year the company launched a big exploration
program targeting high impact, deepwater turbidite prospects off
the east coast. The giant discovery came on the first well.
plans to drill 31 wells under the NELP I initial exploration program
with a budget of $350 million (US).
reserves of seven trillion cubic feet is impressive, more important
is the impact it will have on India. Reliance has announced that
the structure has the potential to supply 1.4 billion cubic feet
of gas a day.
the national oil company, which has all the prime acreage in India,
only produces 1.9 billion cubic feet of gas daily from all of its
operations and India's total gas production is in the range of 2.5
billion cubic feet per day," Blakeley said, "so virtually half of
the country's current total output can be matched from this one
more, Reliance estimates it can deliver the gas to market within
three to four years -- an ambitious goal, he added.
moment, everybody is waiting for the independent engineering report
to certify the reserves," Blakeley said. "When that is released
people will sit up and take notice."
say this discovery could have an enormous impact on India's gas
picture. There is a big demand-supply gap in India and at present
there are numerous proposed LNG projects as well as some pipeline
projects that could be affected by the new reserves from this discovery.
reserve figures are certified by an independent source, the regional
impact of the discovery will cast a shadow over a number of LNG
projects," Blakeley said. "Potential pipeline projects could be
impacted as well. Unocal is attempting to push forward a proposal
to export gas from Bangladesh to Indian markets."
has made a big discovery with about 2.4 Tcf of reserves in Bangladesh
(in-place reserves of about six Tcf) that the firm is refusing to
develop until there is a recognized market and the company sees
India as that market.
this is a politically sensitive issue," he continued. "Bangladesh
has enormous reserves that a recent study by the U.S. Geological
Survey in conjunction with the Bangladesh government estimated at
32 trillion cubic feet. Unocal has said the reserves could be as
high as 60 trillion cubic feet. But because of the strained relations
between the two countries, Bangladesh does not want to be seen exporting
gas to its neighbor.
discovery could cast even more uncertainty over any pipeline project
from Bangladesh," he said. "If India can supply its own needs the
firm will have no interest in working with Bangladesh."
the impact on the market is how any discovery must be judged. The
Indian government has indicated that even after the gas from this
find is absorbed there will still be a demand-supply gap of approximately
1.8 billion cubic feet of gas daily, leaving room for LNG and pipeline
its size and potential impact on India's natural gas supply, developing
the new deepwater discovery will be challenging. The discovery is
off India's east coast, but the major industrial markets are in
the country's north and on the west coast. A costly pipeline will
be necessary to move the gas to the markets with high demand.
also will drive up the cost of development. Obviously, deepwater
fields are more costly, but the reservoir is relatively shallow
subsea, which can be a problem.
is 177 square kilometers and this vast size coupled with the lower
pressure in a shallow reservoir will require a lot of development
and production facilities. That drives up the cost of development,"
he said. "There is also some concern that low reservoir pressures
may reduce sustainable flow rates."
One industry watcher estimated it could take in excess of $2 billion
to develop the field, but Blakeley doesn't see Reliance walking
away from the discovery.
"Due to the potential impact this find could have on India there
will be some pressure from the government to develop the structure,"
he said. "Also, The Reliance Group is such an aggressive company
that their track record over the last five years has surprised the
industry. But obviously, they will need help to develop the field
since the investment is so high."
The Reliance discovery has enhanced the prospectivity of neighboring
blocks. Two blocks adjacent to it were awarded under NELP III late
last year, according to Blakeley. The block immediately to the east
of the discovery was awarded to Reliance. A block to the northwest
was awarded to another Indian company, but Reliance is actively
pursuing a farm-in on this block.
Blakeley said the firm has indicated this block has as much or
more potential as the discovery block.