BP to Help ONGC Boost Mumbai High Oil, Gas Production Under 10-Year Deal
Global energy giant BP is set to collaborate with Oil and Natural Gas Corp. (ONGC) to enhance oil and gas production from the Mumbai High fields under a 10-year technical service contract. BP has committed to increasing oil production by 44% and gas output by 89% in exchange for a fixed fee.
The BP-ONGC Agreement
ONGC signed the technical service contract with BP last month to reverse the declining output from the aging field. This collaboration is structured to leverage BP's expertise and technology to boost production levels.
Contract Details
Under the agreement:
- ONGC will make all the necessary investments.
- BP will provide technical advice and expertise.
- For the first two years, BP will receive a fixed fee.
- Thereafter, BP will get a share of the incremental oil and gas production.
Production Targets
BP projects a significant increase in production from the Mumbai High field:
- Oil production is expected to rise by 44% to 65.41 million tonnes.
- Gas output is projected to increase by 89% to 112.63 Billion Cubic Metres (BCM).
The increase in production is expected to commence in the next fiscal year, starting April 1, with full-scale visibility anticipated by 2027-28.
Financial Implications
ONGC estimates that the incremental production will generate additional oil and gas revenue of up to $10.3 billion and contribute as much as $5 billion in taxes and other levies to the government.
BP's service fee is subject to a 25% ceiling. The contract period with BP is 10 years, with a possible extension of five years.
Historical Context
The Mumbai High field currently produces approximately 132,265 barrels of oil per day and around 13 billion cubic meters of gas. Without intervention, this output was projected to decline significantly by 2037-38.
The Mumbai High field, discovered in February 1974, is India's most prolific oil field. Its current output accounts for almost 38% of India's oil production and 14% of its consumption.
Significance for India
For a country that relies heavily on imports to meet its crude oil and natural gas needs, the BP deal offers a promising prospect for boosting domestic production and reducing import dependence.
ONGC believes that the field still holds a balance reserve of 80 million tonnes of oil and over 40 BCM of gas, making it crucial to partner with companies like BP to tap these resources effectively.
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