Hydrocarbon Risk and Uncertainty: Indian Scenario

Hydrocarbons exploration and bidding is a high risk venture in every project that is taken by any corporation. There is always a chance of failure with the total investment made versus chance of success. If the calculated pay back amount less than the expenditure, then a company may reject the project or take less than 100% working interest in operation to tolerate risk. Low total resource volume, minor prospects, very low probability of success (POS) and low or very low level of knowledge (LOK) are some of the characteristics study play major role. Royal Dutch shell won the license for the Mangala block RJ-ON-90-1 of Rajasthan (India) in the year 1992 from Indian Government with a production sharing contract (PSC). In 1998, Royal Dutch shell sunk a well in area and used logging probe (to detect the hydrocarbons) which gave negative reading, Cairn had 10% of stake in the leasehold at that time. It then purchased the complete leasehold from shell in 2002 and now producing from one of the highest oil reserve region in India. Shell lost the golden opportunity of huge production because of a wrong reserve estimate. Another case describes the world’s biggest natural gas reserve discovery of D-6 block in Krishna Godavari basin in Southern India during 2002 by Reliance Industries. The proved and the probable reserves were estimated to be 9.65 TCF initially and many projects were developed based on gas generation from D-6. As of now, the production declined to 1.93 TCF with a decline of 80% calculated. Within a decade, the production declined and the future projected power projects of India suffered because of the declined gas supply. An assessment of reservoir performance, geological models, geophysical and geochemical information and the basin modelling capabilities is used to estimate likely volumes of hydrocarbons in place at particular sites.