State-run Oil and Natural Gas (ONGC) said its wholly owned overseas subsidiary ONGC Videsh (OVL) has made a “significant discovery” of oil in one of its onshore wells in Colombia. During initial testing, the well produced 6,300 barrels-per-day of crude oil, the company said.
The well is in the CPO-5 block in Colombia, where OVL holds 70 per cent stake. The remaining stake in the block is held by GeoPark, an independent oil and gas company focussed in Latin America. This is the fourth commercial find in the block by OVL.
“The company now plans to drill more wells to explore the other plays in the block in immediate future,” ONGC said in a statement. OVL is also undertaking additional 3D seismic data to map more drillable prospects in the other sectors of the block.
Though domestic crude oil production has been faltering in the absence of adequate incentives in low oil price scenario, overseas production is continuously on the rise. Overseas oil and gas production as a percentage of domestic output has risen from 14.8 per cent in FY16 to 38.7 per cent in FY20.
Domestic crude oil production has fallen 6 per cent annually to 30.5 million tonne in FY20. About 60 per cent of that has been produced by ONGC. Another 27 per cent was extracted by private companies and other joint ventures, while the remaining output was from state-run Oil India.
ONGC is grappling with under-recoveries stemming from low crude and gas prices, and coupled with disruption in demand for refined products, the company’s cash flow and leverage is seen to weaken.
ONGC has requested the government to consider exempting it from payment of cess, royalties, and profit petroleum until crude prices are less than $45 per barrel. With the government reducing domestic natural gas price to $1.79 per million British thermal units, the company expects to face a loss of around Rs 7,000 crore in FY21 from its gas businesses. The average gas output cost of ONGC — which produces about 80 per cent of the domestic natural gas — is $3.7 per mmBtu.