New Delhi: Oil & Natural Gas Corp, India's largest energy explorer, plans to spend Rs66 billion (Dh4.78 billion) this year to maintain output from ageing fields.
The producer wants to sustain output levels in areas off the nation's west coast, including Bassein, which supplies 33 per cent of India's current gas output, Sudhir Vasudeva, director of offshore operations, said in an interview in New Delhi.
Maintaining production is key for ONGC, which hasn't been able to produce oil or gas from any of the 105 fields it won in India's exploration auctions since 1999.
The decline in crude prices has forced the explorer to hold off on increasing output at the overseas fields acquired last year.
"ONGC has been spending a lot to maintain production but the worry is that they have not discovered any big new fields for a long time," said Deepak Pareek, an analyst at Mumbai- based Angel Broking Ltd.
The Mumbai High fields, 160km northwest of Mumbai in the Arabian Sea, were discovered in 1974 and have recoverable oil reserves of around 1,300 million metric tonnes, Vasudeva said. That's about 10 times India's consumption of 128.5 million tonnes in 2007, according to the BP Statistical Review of World Energy.
"The bulk of the spending in the western offshore area will be on Mumbai High," Vasudeva said. "We are a cash-rich company and have no problems with liquidity."
The explorer has extracted 19 per cent of the reserves and hopes to keep producing oil from the fields for another 30 years, recovering 40 per cent of the reserves, Vasudeva said.
The country's oil production for the year ended March 31, 2008, rose 0.4 per cent to 34.12 million tonnes, according to the oil ministry.
ONGC aims to produce 11.9 million tonnes of crude from Mumbai High in the year that started April, 2.4 per cent more than the output of 11.62 million tonnes a year earlier, Vasudeva said.
"The technology they have and how good they are at managing their reservoirs will determine their success," said Pareek, the top-ranked analyst for ONGC according to data complied by Bloomberg, who has a "buy" recommendation on the stock.
"Compared with global players, ONGC doesn't really have the best technology for deepwater exploration and production."
ONGC shares have gained 27 per cent in Mumbai trading this year, compared with a 13 per cent increase in the benchmark Sensitive Index of the Bombay Stock Exchange and a 38 per cent advance for Reliance Industries Ltd, an explorer and refiner.
Reliance, the first to start production from fields won in India's oil and gas field auctions, has said it plans to supply more than 40 per cent of India's fuel requirements by March 2010.
Production will rise to 550,000 barrels of oil equivalent a day and boost the nation's output by 40 per cent, Reliance Chairman Mukesh Ambani said in September, when he announced the flow of oil from deep-water wells located in the Krishna-Godavari basin off India's east coast.
ONGC produced 76 per cent of the country's crude oil output and 68 per cent of its gas production in the 11 months to February, according to data provided by the Oil Ministry.
Crude oil in New York trading has tumbled 61 per cent over the past year as a global slowdown reduced demand.
Prices were little changed at $45.99 a barrel on Monday.