Rigging The Wild West
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Dhirubhai Deepwater KG1, the $700,000 a day drill-ship
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t was one of those moments that make oil exploration in the deep seas such an unpredictable business. Early in September, a team of engineers from Oil and Natural Gas Corporation (ONGC) and its contractor TransOcean, the world’s largest offshore drilling company, watched in horror as a live camera feed showed mud gushing out vertically from a well they had been drilling for the past 35 days. The feed, captured by a remotely operated vehicle two kilometres below the water surface, showed that something was drastically wrong. The blowout preventor, an essential piece of equipment on every oil well that regulates pressure to ensure safety, had failed.
Drilling had to stop immediately.
As Forbes India goes to print, the entire top brass of ONGC is sweating it out. They are monitoring developments at KK-4CA, the well off the Konkan Kerala coast, which in many ways represents the company’s biggest bet in recent times. At $700,000 a day, the drill-ship Dhirubhai Deepwater KG1, being used to drill it has been hired from arch-rival Reliance Industries (RIL). Guided by satellites to keep its position in choppy seas, it was scheduled to drill two wells costing Rs. 500 crore each in the ultra-deep waters in the Kerala-Konkan basin. As of now, it is not known how much time it will take to restart work. Till that happens, ONGC will bleed $200,000 every day. Its drilling schedule will go off kilter, an event that could prove to be much more expensive in the long run.
The decision in Kerala-Konkan was contrarian to start with. While the rest of the world looks for gas and oil in the very prolific Krishna-Godavari and Cauveri basins on the east coast of India, ONGC is looking West. The quest is to open a brand new oil-frontier in India. The geologists are looking for a basin which is a receptacle for sediments from a pre-historic river system flowing out through what they call the Palghat gap, a space in the Western Ghats between Tamil Nadu and Kerala formed millions of years ago. ONGC thinks this paleo-delta, created out of the river that extends hundreds of miles into the sea, could be a huge yet undiscovered entrapment for hydrocarbons.
The decision was made after pouring over seismic data from thousands of kilometres of India’s offshore coastline. ONGC’s offshore exploration and development chief S.C. Rao is unequivocal, “This is our best chance,” he says. His team are convinced that the maturity of the source rock and the cap make a `wonderful combination’ that would hold a very substantial reserve. Their resolve has been backed fully by the ONGC board.
The company is to drill two wells at what the geologists believe are the most prospective locations in the block. The first well is targeting a depth of 6,500 meters below the seabed, and KG1 that began drilling on August 1, has now reached half this depth. The drill bit was just about to penetrate the first target horizon (called fan A) when the BOP failed. When drilling restarts, samples will be drawn from the fans to show if ONGC is on the right track. These will be taken for evaluation from three such fans throughout September, by which time it will be known whether there is any oil or gas. The ship will then move to start drilling the second well in the region.
Slippery Terrain
For oilmen, Kerala-Konkan is not a new dream. Many have chased it and failed. The geology has attracted all manner of oil explorers since the 1970s. About 15 wells have been drilled, but, mostly in the shallow waters. Among those who have tried their unsucessfully luck include Shell, BHP, ONGC and most recently RIL.
Why then is ONGC taking such a step? For one, without a big find it runs a serious risk of being overtaken by rival Reliance Industries in terms of gas production in less than a year. On the oil front too, newer challengers like Cairn India could threaten its position as the country’s dominant energy producer. Pressure is also mounting from the government as well as the Director General of Hydrocarbons (DGH), the upstream regulator who monitors commitments made by oil companies. “What ONGC needs not just another discovery, but to open a new basin — a new frontier like Bombay High in the 70s and the Krishna-Godavari that was opened by RIL in 2003,’’ says Mehul Thanawala vice-president, JM Financial. A basin, would be a new area of operation where many subsequent discoveries can later be expected.
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