Poor Indian E&P performance in 2016-17: No respite in sight either

The 2016-17 oil and gas production data shows crude output is lower by 2.53%. All major segments -- ONGC, OIL and the private sector -- under performed. Clearly new developments have not been able to stem the natural decline from ageing fields.

Crude output will continue to stagnate or decline over the foreseeable future.  Cumulative gas production is lower too for the year.  The Daman development of ONGC -- that was meant to bring in 8 mmscmd of peak gas -- now stands put off by about two years because of the company's inability to get new contractors to quickly plug the gap after the primary contractor declared bankruptcy. The output from here would have countered the natural decline from the Bassein, ONGC RIL tenders contracts and largest gas field.

With RIL's D-6 output in permanent decline, subsequent to the closure of two wells due to water and sand ingress and lackluster results from side tracking activities, it does not look like India's gas output will see a significant upswing in 2017-18 or 2018-19.

The real effect of the incremental output from Daman and KG-DWN-98/2 will only be felt by the end of 2019 and 2020. The country therefore has not option but to fall back on expensive Indian LNG projects to plug the demand-supply gap. Given the price sensitivity of the Indian market, gas demand, but of the uptake in the CGD sector, may remain tepid too in the intervening years if LNG prices continue to stay high.

Source: Indian PetroPlus