India strikes ‘first oil’ to enter ‘world’s deepwater club’

After having identified substantial lithium resources last year, on 7th January 2024, India commenced extraction of fresh crude oil reserves located in the Deep-Water Block 98/2 at the Krishna-Godavari basin.

The project is located about 30 km off the coast of Kakinada, Andhra Pradesh.

India’s Oil and Natural Gas Corporation (ONGC), a fortune-200 company, has activated a reported 4 out of a total of 26 wells at the site in the Bay of Bengal.

While initial work on the project began in 2016-17, pandemic-led disruptions caused delays that the central public sector undertaking under the ownership of the Ministry of Petroleum and Natural Gas has successfully overcome.

With Phase 2 now being completed, the highly significant find is expected to yield 45,000 barrels per day when fully operational, raising national production by 7%.

In addition, the project will produce gas equating to 7% of the country’s total production when Phase 3 of the project is concluded in May-June 2024.

On the occasion, Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri announced in a press conference,

…I am delighted to inform all my fellow countrymen that the first oil has been extracted yesterday…I want to congratulate ONGC and all those who have made it possible.

In terms of ONGC’s output, the project is expected to raise annual volumes of oil and gas by 11% and 15%, respectively.

Building India’s energy self-reliance

As the third-largest importer of oil, India has historically incurred a large budgetary burden to meet the necessary payments for its roughly 85% oil import dependence.

As Chairman of the Independent Energy Policy Institute, a think tank based in New Delhi, and Distinguished Research Fellow at the Oxford Institute for Energy Studies, Narendra Taneja hailed the move as “a very big step” in terms of securing India’s energy presence and reducing the country’s energy dependence.

He added,

…(this is) very good news because in the world there are only 7 or 8 countries that have the capabilities and techniques to go into the deep ocean to identify oil and gas resources and then begin extraction as well…. India is now part of the world’s deepwater club for oil and gas…

This major development comes shortly after India signed a preliminary oil and gas deal with Guyana in late 2023.

Oil demand and refining

A Reuters report published earlier this week found that fuel demand has reached a 7-month high in India, having risen 6.2% MoM and 2.6% YoY.

In a bid to continue to secure the country’s energy position, refining capacity is projected to see a substantial increase of over 20% by 2028.

Note: Mr. Narendra Taneja’s comments were in Hindi. The translation is my own.

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