ONGC saves $150m on MHNRD-II completion

Vol 18, PW 21 (18 Jun 15) Exploration & Production

Everybody complains about ONGC project delays.

But for once a delay has had unintended positive results saving ONGC more than $150m in rig and equipment hire rates, which continue to fall. This month ONGC’s Mumbai High asset filed a completion report on its Mumbai High North Redevelopment-II (MHNRD-II) project, soon to be submitted to the Board.

MHNRD-II was to be completed, according to the project feasibility report, by September 2012 but actual completion happened two years later in April 2014. ONGC planned to spend Rs6855.930cr ($1bn) on MHNRD-II, split into Rs3325cr ($519m) for four unmanned wellhead platforms and 75.5-km of pipelines and Rs3530.93cr ($551m) to drill 50 horizontal and 23 conventional wells.

However, actual spending was much lower as falling oil prices brought down equipment costs and rig hire charges. Installing the four platforms N-14, N-17, N-18 and N-20 and laying 75.5 km of pipeline only cost Rs2845.79cr ($444m).

“Increased competition among bidders helped us get better prices for these facilities,” says an ONGC source. Instead of the expensive 50 horizontal wells planned, ONGC drilled 38 but increased the number of cheaper conventional wells from 23 to 35, reducing drilling costs to Rs2940.69cr ($459m).

“We benefited from lower average rig day rates and a reduction in drilling days,” says ONGC. As a result the Internal Rate of Return (IRR) rose from an expected 19.6% to an impressive 30.73%.