Oil India seeks more hydrocarbon concessions globally

India's second largest public sector company Oil India Limited (OIL) is seeking more hydrocarbon concessions across the globe, including Brazil and Mexico."We are aggressively looking for a lot of good property from where we can bring crude oil into India," Sunil Kumar Srivastava, chairman and managing director, told PTI yesterday.

"The government of India is very supportive of our overseas ventures. They are encouraging us to go global to help reduce energy import volumes," he said."The more oil and gas we bring into the country, it would help reduce the country's energy import bill," he said on the sideline of the Singapore International Energy Week.

India imports about 75 per cent of its crude oil and 30 per cent of its natural gas requirements a year.Among its major ventures abroad, OIL has invested USD 900 million on four per cent farm-in stake in offshore Mozambique.

OIL and ONGC Videsh (OVL) had announced a 10 per cent farm-in acquisition with Mozambique in January this year.The company operates in 11 overseas countries and produces small quantities of hydrocarbon in the United States, Venezuela and Russia.

Srivastava, along with B C Tripathi, chairman and managing director of GAIL and Nishi Vasudeva, chairman and managing director of Hindustan Petroleum were among the eight nominees for Platts Asia CEO of Year award which went to Chengyu Fu, chairman of China Petrochemical Corporation (Sinopec Group).

Source: ET

India likely to strike deal with Vietnam for oil exploration

Looking to deepen its economic ties with Vietnam, India is likely to strike a deal for exploration and production of oil and gas during the visit of South East Asian nation's Prime Miniter Nguyen Tan Dung on October 27. 

Ahead of its prime minister's two-day visit here, Vietnam has also evinced keen interest in greater cooperation in key areas of defence, security and oil exploration and has hoped that some pacts will be signed during the trip. 

"We are looking at enhancing India's cooperation in the fields of hydrocarbons and oil exploration," oil minister Dharmendra Pradhan told PTI. 

He said he interacted with Vietnamese authorities on further cooperation in the oil sector during President Pranab Mukherjee's visit to Vietnam in September and wants this cooperation to be taken further. 

"We are exploring more options to further our cooperation with Vietnam in the oil sector," he said, hinting at further talks and some possible tie-ups during the Vietnam Prime Minister's visit. 

Pradhan said a team of officials of state-run Indian Oil Corporation had visited Vietnam and explored some business ventures which may come to fruition during the Vietnamese President Pranab Mukherjee's visit. 

During Mukherjee's visit in September, ONGC Videsh Ltd, the overseas arm of state-run explorer Oil and Natural Gas Corp (ONGC), had signed an agreement to expand its oil and gas exploration in offshore Vietnam. 

The Indian flagship firm agreed to consider exploring in 2-3 blocks out of the 5 areas in South China Sea that Vietnam had offered on nomination basis in November last year. 

The five blocks or areas - 17, 41, 43, 10 & 11-1 and 102&106/10, offered in November last year lie outside the territory claimed by China in the South China Sea. 

OVL forayed into Vietnam as early as 1988, when it bagged the exploration license for Block 06.1. The company got two exploration blocks - Block 127 and Block 128, in 2006. 

However, Block 127 was relinquished after completing the work programme, and the other Block 128 is currently under exploration. 

Additionally, ONGC Videsh and PetroVietnam have been engaged in further discussions for possible expansion of cooperation in hydrocarbon sector of Vietnam. 

OVL had relinquished Block 127 in offshore Phu Khanh Basin after it failed to find any oil or gas in the area. 

Though it had decided to withdraw from adjacent Block 128, it has decided to stay put because of India's strategic interests in the region. The exploration period for the block has been extended until June 15, 2015. 

China claims sovereignty over most of the South China Sea where Block 127 and 128 are located and had warned the Indian arm from drilling in the region. 

OVL continues to own 45 per cent in Vietnam's offshore block 6.1 and its share of production was 2.023 billion cubic metres of gas and 0.036 million tonnes of condensate. 

During his visit, Tan will be accompanied by a delegation of a number of businessmen, who will hold talks with the top Indian leadership on strategically-important bilateral issues of security and energy as well as regional matters.

Source: TOI

Challenges of digging a well; undersea!

It is said that in the good ol'days, digging an oil well was an easy business. If you were at the right place (like say in Texas), a dedicated knock on the ground would send black-gold gushing forth. In fact, so much of it was freely available that it upset people back then. For instance, a rancher in Texas in 1902, WT Waggoner was irritated when he came across oil while digging for water. An annoyed Waggoner is reported to have wailed:  "I wanted water, and they got me oil. I tell you I was mad, mad clean through. We needed water for ourselves and for our cattle to drink."

A century later, things have changed dramatically. From a situation of low demand and oversupply, we are now in an era where crude oil supply is struggling to keep pace with rapidly growing demand.
The trouble is, even as demand for crude oil keeps growing, output from the known oil wells is showing signs of plateauing. According to the Association for the Study of Peak Oil and Gas, many oil-rich countries have already passed their peak rate of oil production; an indication that the world peak of production could now be around the corner.[5] At the same time, there is no let up in demand. This means new wells need to be identified and dug; some of them in places where extracting oil can be a formidable task.

And when 70 percent of the planet is water, drilling for oil in the sea becomes more than just an option.

Prior to 1947, drilling beyond the shore was impossible, and often unnecessary. The first 'true' offshore oil well was drilled off the Louisiana coast in the Gulf of Mexico by Kerr-McGee Oil Industries. Some 17 kms away from the shore, the well was dug at a depth of some 15 feet.[2][3]  Today, in the same waters, the deepest and the biggest oil rig named Perdido is operational. Located in the Gulf of Mexico, Perdido draws oil from a depth of about 2450 metres (8000 feet).[1] Thus in a matter of 6 decades and more, we have moved from a depth of 15 feet to 8000 feet.
Going for the dig

Yet, with all the technological advances, drilling in the sea is still fraught with challenges, and a costly proposition. Right from locating a deposit to reaching it and from transporting oil to finally closing the well, there is a long chain of processes
Typically, a deep-sea oil well operates in depths of 1,500 metres plus where one faces the HP-HT (High Pressure and High Temperature) combination. Temperatures dramatically vary when it comes to deep-sea wells. For instance, on the surface of the sea-bed, the temperature can be several notches below freezing point (but the water does not freeze because of salinity and high pressure). However, as you dig deeper under the sea-bed, there is a sharp rise in temperatures. In fact, it can go as high as 230°Celsius.

Another major obstacle is high pressure, which can go up to as much as 35,000 psi. In fact, drilling into rock-layers increases the pressure at every given point. According to estimates, the pressure within the underground reservoir can be extremely high and dangerous, wherein every square centimetre area is subject to pressure equivalent to the weight of a medium-sized car. The challenges of drilling so deep are particularly notable because the fields in question are often so deep that they can’t be visited by humans, even in submersibles.

Hitting bull’s eye

Nonetheless, the biggest challenge for any oil company is to hit the 'sweet spot'. Locating an oil deposit in the sea-bed is feat in its own. Keeping in mind the depth, location of the field and type of sea-bed, the possibility of an oil deposit is much varied. If the hit is not ‘spot on’, huge losses will be incurred. According to an industry rule of thumb, drilling a deepwater "dry-hole" can be set one back by as much as US $100 million. Even so, according to industry experts only 2 out of 10 digs actually yield oil (or gas).

Little wonder, oil exploration companies deploy the latest in technology to minimise, if not altogether avoid, such dry-holes. One such methodology is to dig a reference well, after undertaking extensive geological mapping of the region, including conducting a gravity-magnetic map to ensure the oil reservoir.

Other factors like existing infrastructure, depth of the well, weather and currents, seabed conditions, cost of construction and commissioning of permanent structures, time to first production, equipment reliability, well accessibility for future monitoring or intervention; make drilling in the sea a fairly complex and costly proposition. Hence, there are only a few companies in the space, who have the expertise, and the wherewithal to undertake such explorations.

Finding the right partner
But that is as far as machine or technology goes. At the end of the day, one still needs skilled manpower to deploy the technology effectively. Getting the right people for the job is another big challenge.  Even after you have identified them, retaining them is equally a challenge, especially given the long lead times before a find is executed. Because of the challenging working conditions and the high level of technical expertise need, there is only a small pool of people who have the right mindset and knowledge fit for deep sea exploration. Same holds true for companies that exploration firms have to partner with. For instance, GE is among the handful of players with a proven track record, having provided systems for subsea exploration for over 40 years, and has over 1,000 systems installed worldwide.

Lessons from Deepwater
In spite of all the safety and safeguards, things can go horribly wrong on an offshore oil rig. The two biggest disasters in exploration history happened at some of the biggest rigs. One was Piper Alpha in North Sea, where an explosion in 1988 destroyed the rig and resulted in the death of 167 workers. The second was in 2010 at Deepwater Horizon in Gulf of Mexico, off the US coast, where an explosion caused by a blowout killed 11 people and caused the largest offshore oil spill in history.
The lesson learnt from such incidents is that there just cannot be any room for complacency. Given the technology deployed and the associated risks, offshore drilling is a fairly costly proposition. Around 30 per cent of global oil production is obtained through offshore drilling, with less than 1 per cent of wells deeper than 1,500 metres.  According to International Energy Agency estimates, oil extraction through deep-sea drilling currently costs between US $35-$65 per barrel. With crude prices hovering over US $100 a barrel, there are decent profits to be made from offshore drilling.

Deep sea – The next big thing in India?
Finally, keeping in mind India's peninsular nature and the fact that offshore gas deposits have been found both in the West (Arabian Sea) and East (Bay of Bengal), there is big potential for deep sea drilling.  The quality of crude extracted from India’s sedimentary basins is said to be better than that of the crude imported from the Middle East. With much of India’s offshore assets yet to be explored,   deep sea could be the next big thing in India's pursuit of energy security.

Source: Moneycontrol

The current scenario in India’s natural gas market

According to EY, India’s expanding economy and growing population have led to increased consumption of primary energy resources such as coal, oil and natural gas in the country.

In line with this, its primary energy consumption grew at a compounded annual growth rate (CAGR) of 6% to 563.5 million t of oil equivalent (toe) in 2012 from 420.1 million toe in 2007.

The share of natural gas in its primary energy mix increased marginally from 8% in 2008 to 8.7% in 2012. This is fairly low, compared to the global average of 24%, primarily due to supply side constraints. Furthermore, in terms on individual consumption, India’s natural gas consumption of 44 m3 per capita is far behind the global average of 470 m3 per person.

Significant gas deficit

Despite low gas consumption relative to global trends, India’s natural gas market is nevertheless seeing a supply deficit, primarily due to low domestic production and an inadequate transmission and distribution infrastructure. According to EY, domestic gas production received a significant impetus with commencement of production at the KG-D6 field, located in the country’s east coast in 2009, however the field’s output has steadily declined and has hit a trough of 12 million m3/d in the third quarter of 2014.

According to Reliance Industries Limited (RIL), the fall in KG-D6’s production is mainly due to geological complexity and a natural decline in the fields. The decline in most of the country’s ageing fields has further compounded the supply deficit.

On the other hand, the demand for natural gas in India has increased significantly due to the demand from the power and fertilizer sectors, and cumulatively accounted for more than 61% of gas consumption in 2013. The demand is also driven by its growing usage in the city gas distribution (CGD) sector and industrial sectors, such as refining and petrochemicals. Rising concerns in regards to carbon emissions have also contributed to the demand for natural gas in the country.

This has led to increased Indian dependence on imported LNG. The country’s LNG imports have increased from approximately 8 million t in fiscal year 2009 (FY09) to 11 million t in FY13, accounting for 28% of total supply. India is currently the world’s fourth largest importer of LNG in the world, according to the BP Statistical Review of World Energy 2013.

Rising production and imports

EY expects that the shortfall in natural gas in the country will continue over the next few years, with supply trailing demand. Shortage of gas is likely to reach its peak in FY15, with approximately 37% of the demand being unmet. However, from FY16 onwards, the deficit may decrease, primarily due to the planned production of private and joint venture companies and increased LNG import capacity. Power and fertilizers are expected to remain the anchor segments that consume natural gas and are likely to account for approximately 68% of the total demand for it in FY17. Furthermore, deregulated pricing of petroleum products and an increasing focus on addressing environmental concerns are expected to drive the demand for natural gas from industrial users, residential users through piped natural gas (PNG), and in the transportation segment through the demand for compressed natural gas (CNG). However, this demand is highly price sensitive and will depend on the price affordability of end users, especially in the power and fertilizer sectors.

EY expects the total supply of natural gas to reach 359 million m3/d in FY17, a CAGR of 15% from FY14 in india. Most of this incremental supply will fail to keep pace with the anticipated rise in demand. The country’s potential to import LNG is expected to increase to 150 million m3/d in FY17, contributing approximately 42% of the total supply.

EY additionally expects domestic production to increase at a CAGR of approximately 12%. This is likely to come from new discoveries which are currently under development, expectation of partial recovery in the output from KG-D6 and increased production from unconventional sources, particularly coal bed methane.

Source: Energy Global

Indian Oil Corporation to invest in shale-gas and liquefied natural gas projects in Canada

Indian Oil Corporation will invest USD 4 billion in the British Columbia province, Canada, to source liquefied natural gas from the region.

Premier of British Columbia, Canada Christy Clark said: "Indian Oil is poised to make its biggest investment in Canada to secure natural gas for India from BC."

She said the state-run firm will invest USD 4 billion for securing LNG supplies from the Canadian province. IOC, in May, signed a deal to buy 10 per cent stake in shale-gas assets and a linked liquefied natural gas (LNG) project in British Columbia.

The Canadian asset will produce as much as 19.68 million tonnes of LNG a year for 25 years starting in 2018.

That apart, Clark said, GMR Group of India and IC-Impacts of her province will now work together on safe and sustainable infrastructure like innovative pavement technology, construction design and water and waste water infrastructure.

Wooing domestic investors, she said: "We, in British Columbia, would like to partner with this great country to realise its potential by providing LNG to power its future. We recognise that there will be a mix of energy sources - coal, oil, solar, wind.

"India needs a million skilled workers a year, every year, for the next 15 years. We can help. If we can help train 3,000 and 300 of them help us build an LNG industry -- it's good for you and good for us."

Reliance Industries has also signed on with IC-Impacts to share research, training and develop new technologies in such areas as specialised building materials for infrastructure like bridges, roads and buildings.

The state government of Punjab and BC have committed to work together on skills training, education and agriculture.

Projecting BC as an attractive destination for investment in the LNG space, Clarke said: "There are several advantages -- short transportation time to Asia to save cost, lower operating costs, vast gas reserves, stable and reliable jurisdiction and a strong regulatory regime."

The Canadian province is also expecting big ticket investments in its energy space from other geographies as well. It is likely to finalise USD 36 billion from Petronas of Malaysia by this new year.

Earlier this week, Clark announced a funding for 20 scholarships, worth a total of 50,000 dollars, to support and encourage two-way exchange of students between the University of the Fraser Valley (UFV) and Sanatan Dharma (SD) College in Chandigarh.

Source:ET

Investment decision only after clarity on gas price: Reliance Industries

 Reliance Industries has said it will make a final investment decision on producing gas from the R-Cluster discovery in the flagging KG-D6 block only after the government decides on gas price hike.

RIL and its partners BP plc of UK and Canada's Niko Resources plan to produce about 13 million standard cubic meters per day of gas for 13 years from D-34 discovery, known as R-Cluster, in the KG-DWN-98/3 or KG-D6 block by 2017-18.

The planned output from D-34, which is estimated to hold an in place gas reserve of 2.2 Trillion cubic feet, is equivalent to the combined current production from Dhirubhai-1 and 3 (D1&D3) gas field and MA field in the KG-D6 block.

In a presentation to investors post announcing its second quarter earnings, RIL said it has completed Front End Engineering Design (FEED) as well as geo-mechanical studies for the R-Cluster development. Contracting activity was underway for long lead items.

However, "clarity on gas price (is) required for FID (final investment decision)," RIL said in the presentation.

The government last month for the third time postponed a decision on raising natural gas prices. Now, it is looking at announcing a decision by November 15.

For RIL, a revision in natural gas prices was due on April 1, 2014, when the $4.2 per million British thermal unit rate fixed for first five years of production expired.

A panel appointed by the previous UPA government had proposed a formula which would have at least doubled the rates but the same is under review with the new government looking at moderating the increase to keep the burden on consuming power and fertiliser industry minimal.

"Clarity on gas pricing to enable achieving goal of enhanced production towards ensuring India's energy security," RIL said in the presentation.

RIL has so far made 19 gas discoveries and 1 oil find in the KG-D6 block. Of these, D1&D3 gas fields were brought to production in April 2009 while MA oilfield began pumping oil in September 2008.

D-34 is part of what is known as R-Cluster of discoveries. R-Cluster comprises four discoveries - D-29, 30, 31 and 34. Of these, only D-34 has so far been declared commercially viable while the Declaration of Commerciality (DoC) of others has been refused in absence of DGH prescribed tests confirming the discoveries.

Last year, the government approved RIL proposal to invest $3.18 billion in bringing D-34 to production.

RIL estimates that output from KG-D6 can reach up to 60 mmscmd by 2019 when all of the satellite fields are put into production.

The government has already approved $1.529 billion investment in four satellite fields that can produce 10 mmscmd. Investment plans for rest are under consideration.

Source: ET

Why Subsea Oil & Gas Could Be The Next Big Thing For India

Elephants and oil have little and almost nothing in common; yet there is one anecdotal legend that links both together. Sometime in late 1880s, a dedicated bunch of engineers and labourers were working in the jungles of Upper Assam, extending the Dibru-Sadiya railway line to Ledo for the Assam Railways and Trading Company. To clear the forested path, elephants were employed. Apparently, on one occasion an elephant party returned after hauling the goods, and someone discovered that the mud on one pachyderm's feet was black and smelt of oil.

Since, just a few decades earlier oil had been struck in USA and was being used as a wonder medicine to treat a number of ailments, the British Engineers were aware of what the black smelly thing was. An engineer in the party, William Lake, was much enthused and excited by the discovery.[1] On finding the spot where brackish liquid was oozing out of the ground, the excited Englishman exhorted the labourers, "Dig Boy Dig". Fortunately, the labourers did heed to his implorations. By 1889, a 20-meter high thatch covered wooden structure was erected, and so the first oil well in all of Asia was established at a town that was named Digboi. Subsequently, in the 20th century, more such wells were dug up in the region and with time, Assam became the oil-hub of India.

There was little change in the scenario, till the Union Jack was replaced by the tri-colour in 1947. A young and exuberant India on a tryst of destiny was hungry for growth and self-reliance. Thus, not surprisingly, while framing the Industrial Policy Statement of 1948, the development of petroleum industry was given much prominence. Over the next few decades, various sites in India were geo-scientifically mapped and exploratory drilling was undertaken in Gujarat, Assam and Bengal Basin. With further passage of time, new sites and locations were added to the list -- UP, Bihar, Tamil Nadu, Kutch and Andhra Pradesh.[3]
While oil was being struck in different parts of India, it was all land based. Sometime between 1964-67, Russian and Indian teams from the seismic exploration vessel Academic Arkhangelsk were scouring the Arabian Sea and struck gold, albeit black gold. And so, Bombay High (rechristened as Mumbai High) came in to being in 1976, with the establishment of an offshore oil rig. It was India's first deep sea well and remained so for a long time.

Over the years, the Eastern frontier came to light with the KGN Basin opening up. But even so, the production of oil domestically has been lagging much behind the consumption in India. To state it simply, India roughly produces 1,000 barrels of oil a day, and consumes almost 4,000 daily, making the equation 1:4. This tilted equation makes India dependent on imports from the Western nations, primarily the OPEC of Middle East, and makes it vulnerable to price rise and disruption.
In fact, many significant events in Indian political history have been shaped by oil crisis globally. One of the prime examples is, when Iraq was invaded in 1991 and the price of oil had shot through the roof, India had to pledge its gold reserves to be able to pay for the oil imports. Little wonder, finding oil is not merely a matter of saving money but also of self reliance.
Yet, oil production has largely remained stagnant over the years. Sample this: Mumbai High became operational in 1976, but it still produces around 80% of offshore oil production and almost 45% of the total oil production in India.

Unlike other countries like US, China, Japan, Korea, Brazil and even Malaysia, India has been laggard when it comes to offshore and deepwater drilling. According to estimates, India has a sedimentary area of 3.14 million sq km, comprising of 26 basins.[5] However, a large part of it remains unexplored. According to estimates, a total of 28 billion tonnes of prognosticated resources have been estimated with 67% of them being offshore.[4] It was to promote this exploration that the Indian government came out with NELP or New Exploration Licensing Policy, under which 249 blocks were awarded. Yet, NELP could not create the kind of exploration excitement, and India's deepwater reserves remain mostly unexplored.

While Mumbai High on the western coast continues to pump out significant oil, the outlook for the east coast looks even more promising.[2] Sometime back, ONGC made an ultra deep water discovery in KG offshore at a depth of 2841 metres. Meanwhile the Andaman & Nicobar deepwater sector is envisaged to hold substantial potential, given that the Yadana and Yetagun offshore fields of Myanmar coast are in the vicinity.

Keeping in mind the rising consumption, the ever-increasing costs of oil and the geo-political scenario, what India needs now is a forward-looking policy and a brave outlook when it comes to deepwater exploration. Besides, Indian companies, especially ONGC through its joint-ventures, have now the technological wherewithal to explore deep water basins.
Probably, what we really need is an embodiment of someone like William Lake to exhort, implore and encourage us yet again, uttering repeatedly, Dig India Dig!

Source: Moneycontrol