Gas Ramp-Up From ONGC's KG-Block Further Delayed; Likely To Start From Next Fiscal

The ramp-up of gas production from Oil and Natural Gas Corp's (ONGC's) flagship KGDWN 98/2 deep water offshore exploration and production block is further delayed due to supply concerns, according to a person in the know.

It is now expected to start from May-June next year, this person said speaking on the condition of anonymity.

The $5 billion project which started production of natural gas in 2021, was expected to reach a peak capacity of 10 million metric standard cubic meters per day (mmscmd) by 2024.

The block is currently producing around 1.5 mmscmd and will add another 3.5 mmscmd capacity from May-June 2025 with arrival of the platform rig, the person quoted above said.

The delay in arrival of the platform rig is attributed to post Covid-19 related economic issues where Malaysian suppliers who won the bid to supply platform rigs, faced the economic crunch and got liquidated.

This is now resolved and production of the platforms has restarted, the source said. ONGC is also optimistic about ramping up production to 10 mmscmd by December 2025, he added.

At the time of its launch in April 2018, ONGC had said the estimated capital expenditure on the project would be $5.07 billion and operational expenditure would be $5.12 billion over a field life of 16 years.

An ONGC spokesperson did not reply to queries sent on Tuesday.

Located in the Krishna-Godavari (KG) basin, the KGDWN 98/2 block is one of ONGC's most significant discoveries in recent years. The block holds an estimated 2.5 trillion cubic feet of gas reserves and will contribute significantly to India’s energy mix.

Natural gas produced from the block is expected to play a crucial role in meeting India's growing demand and will help bridge the gap between domestic supply and demand, reducing dependence on liquefied natural gas (LNG).

Given India is expected to consume around 212 mmscmd of gas by 2026, the ONGC block will be close to 5% of the total consumption.

Ratings agency CareEdge recently noted, with the rise in domestic natural gas production, India’s dependency on imported LNG has gradually declined and is expected to remain at around 45% by FY26. This was at 53% as of FY21.

India has added 30 mmscmd of natural gas production capacity by Reliance Industries in the last three years and another 10 mmscmd was supposed to come from the ONGC block.