After $1.2 Billion and 7 Years, ONGC Offers Stake in Deen Dayal Gas Field to Boost KG Basin Prospects

After spending nearly $1.2 billion and seeing limited success over seven years, state-owned Oil and Natural Gas Corporation (ONGC) is looking for partners to help develop the Deen Dayal gas field in the KG basin of the Bay of Bengal. On June 12, ONGC called for expressions of interest from “global oil and gas companies with the necessary technical expertise and financial strength” to join them in creating a viable strategy for the field, according to the tender document.

History of the Deen Dayal Gas Field

The field has produced very little gas since ONGC acquired an 80% stake from Gujarat State Petroleum Corporation (GSPC) in January 2017. GSPC, a Gujarat government company, had discovered the Deen Dayal West (DDW) gas/condensate field almost two decades ago and sold its stake to ONGC to reduce its debt. Initially, the field was thought to contain up to 20 trillion cubic feet of gas reserves, but this estimate was later reduced to one-tenth of that figure.

To date, seven development wells have been drilled in the field. However, only four of these wells were completed, and they did not perform as expected, yielding poor productivity. The other three wells faced severe technical challenges and complications during drilling and had to be abandoned. ONGC is now seeking a global partner to assist in developing DDW.

Financial Implications

In addition to the acquisition cost, ONGC has spent an undisclosed amount of money attempting to bring the DDW field into production. GSPC retains a 10% stake in the field, with the remaining stake held by Jubilant Enpro.

The KG-OSN-2001/3 block, awarded to GSPC and its partners in the first bid round of the New Exploration Licensing Policy (NELP) under Prime Minister Atal Bihari Vajpayee, includes five fields: DDW, DDE, DDN, DD-DT, and DD-BRU. DDW, located about 10 km off the Andhra Pradesh coast, spans 37.5 square kilometers and is currently under development.

Existing Infrastructure

DDW already has a wellhead platform with 16 well slots, a process platform with the capacity to process 5.66 million standard cubic meters of gas per day, and a subsea pipeline to transport the gas to an onshore terminal. ONGC stated that the reservoirs in the field are classified as high-pressure, high-temperature (HP-HT), with in-place reserves estimated at 55 billion cubic meters (1.94 trillion cubic feet) of gas.

The company plans to revise the field development plan previously submitted to authorities. “Considering the technological challenges and costs associated with the field, ONGC seeks technical expertise to determine the future development strategy,” the tender document said. Bids are due by September 12.

ONGC’s Strategic Use of Facilities

When ONGC acquired GSPC’s stake, it planned to use existing facilities, such as the process platform and subsea pipeline, to bring its neighboring KG-DWN-98/2 or KG-D5 block discoveries into production. The KG-OSN-2001/3 block infrastructure was also intended to serve as a backup for Cluster-II discoveries in KG-D5 in case of disruptions. However, the company never used these facilities and instead built new ones on the KG-D5 block.

According to the field development plan submitted by GSPC to the Directorate General of Hydrocarbons in 2009, DDW was expected to produce 200-300 million cubic feet of gas per day. However, actual output has been much lower than anticipated.