The company has submitted the investment plan to the oil regulator Director General of Hydrocarbons along with a proposal for declaring the discovery as commercially viable

State-owned Oil and Natural Gas Corporation (ONGC) plans to invest $4.05 billion in producing natural gas from its ultra deep-sea UD-1 discovery in a block that sits next to Reliance Industries' (RIL) prolific KG-D6 fields, reports PTI.

"We have tentatively planned a capital expenditure of $2.31 billion in producing gas from UD-1 discovery in block KG-DWN-98/2 and another $1.73 billion in operating expenditure," a company official said.

ONGC has submitted the investment plan to the oil regulator Director General of Hydrocarbons (DGH) along with a proposal for declaring the discovery as commercially viable. Once the DGH approves the commercial viability of UD-1, ONGC will make a formal field development plan (FDP) outlining the specifics of producing gas from the find.

The company has submitted an estimated in-place reserves of 3,420 billion cubic feet (bcf) centred around the UD-1 discovery in block KG-DWN-98/2 in its Declaration of Commerciality document submitted to the DGH.

About 55.7% or 1904 bcf of these reserves are projected to be recoverable, he said.

The UD-I discovery provides ONGC with a toe-hold in the prolific KG basin where the private sector giant RIL has found a very large deposit of gas in the adjacent KG-DWN-98/1 block.

ONGC has 65% interest in the block while Cairn India has 10%. Petrobras of Brazil holds 15% and Statoil the remaining 10%. Petrobras and Statoil have, however, decided to exit the block.

The official said ONGC has so far drilled a total of 13 exploratory wells in the 7,294 sq km block that is divided into northern and southern appraisal areas.

The Northern Discovery Area (NDA) consists of Padmawati, Kanakadurga, Annapurna, N-1, D/KT, U, A, W and E gas finds in water depths ranging from 594 metres to 1283 metres. The Southern Discovery Area consisting of UD-1 discovery in Ultra deepwater has a depth of 2841 m.

In Northern Discovery Area a total in-place volume of 115.02 million tonnes of oil equivalent has been established as on April 1, 2010.

As the discoveries are not independently viable, a cluster based approach for development along with discoveries made by ONGC in its adjoining acreages is being pursued, the official said.

"The gas discoveries in the area are planned to be developed based on a hub concept with facilities placed at shallower water depth in GS-29 area along with the discoveries of G-4 and GS-29 in the nomination acreages IG (now Godavari PML) and IB (now GS-29 PML) respectively," he said.

The discovery UD-1 in the Southern Discovery Area is situated in Ultra Deepwater at a water depth of 2841 metres.

An in-place volume of 82.38 bcm of gas has been established in this area, he added.