State-run oil major Oil and Natural Gas Corporation's (ONGC) ambitious plan to invest Rs 3,300 crore to revamp Assam oil and gas asset is likely to go into a tailspin on account of United Liberation Front of Assam's (ULFA) extortion demand last week.
In the last five years, about four ONGC employees became casualties of the insurgency in Assam and Tripura. Another oil and gas major in Assam, Oil India (OIL), has also expressed its concern over the extortion notice of Rs 500 crore served on ONGC.
ULFA demands Rs 500 crore from ONGC
Both the oil companies planned projects to ramp up their assets to strike new oil reserves from their ageing oilfields in Assam. ONGC's decision to go in for the Rs 3,300-crore investment to step up its production in the state, mainly in Geleki and Lakwa Tipams, had come a week ago, just before the ULFA notice made its way in.
The oil major was also planning to drill three wells. But the threat has dampened the spirits of both the companies in embarking on an expansion drive, an industry analyst said.
OIL is ahead of ONGC in terms of exploration acreage in Assam. While the former produces 3.5 million tonne (mt) oil a year in the state, the latter's annual output from the state is at 1.2 mt. With annual production of 5 mt, Assam alone contributes one-sixth of the country's total output of about 30 mt of crude oil a year.
Ajit Hazarika, director (onshore), ONGC, seemed to be undeterred in the face of the abrupt crisis. "We are aiming to produce 3 mt oil in 2010-11. For that, we are planning to replace pipelines and upgrade rigs. Of 600 wells in Assam, 300 are currently active. ONGC will confidently go ahead with the expansion work," he said.
However, an employees' representative was quite upset. He said, "The investment to find out more oil and gas and double the production in three years to 2.14 mt will, of course, be delayed by the ULFA threat. In the last five years, a few employees of ONGC had died in the insurgency."
All of over 9,000 ONGC staff working in the northeast, particularly in Assam and Tripura, have been in fears for several years now, he added.
"Delay in expansion work will hamper the prospects of ONGC and OIL, and the companies are bound to put it off for a while amid the extortion and overall turbulent situation in the state," industry analysts said.
The cost of well drilling is $25,000 a day, they added.
Assam has over 1.3 billion tonne of crude oil (as per findings) and 156 billion cubic metre of natural gas reserves, of which about 58 per cent, which also includes hydrocarbon reserves, are yet to be explored.
An OIL official also appeared unruffled, as he said, "Assam accounts for nearly 50 per cent of the country's onshore crude oil production. The extortion demand will not affect the morale of workers in the state. We are taking all necessary steps to increase oil production in the northeast."