The Oil and Natural Gas Corporation has found traces of a new oil reserve in Gujarat which could increase the company's total onshore oil production by about 20 per cent.

The new hydrocarbon structure located at North Kadi in the Mehsana area is likely to produce at least 1 mmtpa of oil (about 20,000 barrels of oil per day). This is a little less than half the oil production from Mehsana, the company's largest onshore field with a production of 2.2 mmtpa.

"This could be the largest onshore oil find for ONGC [Get Quote] in the last one decade. The area has the potential of producing 1 mmtpa oil and can possibly even go up to 2 mmtpa," an ONGC official confirmed.

ONGC has about 1,200 drilling wells in Mehsana. The new location will require about 500 wells to be drilled and the estimated investment for this would be about Rs 500 crore, industry sources said. ONGC has completed the seismic study of the area and will start drilling once it gets the requisite permissions.

The development assumes significance, as depleting oil reserves, especially on the onshore fields, have been a major cause of concern for the state-run PSU.

In the past three years, ONGC's total onshore oil production in India has declined by 1-1.5 million tonnes due to aging wells and depleting layers of hydrocarbons.

ONGC had struck oil in the North Kadi area over four decades earlier. "It is a proven field. A proposal for release of a new location has been submitted by Mehsana to the higher officials. Very soon the necessary civil work for drilling is expected to start," said a senior official close to the development.

The company has roped in the Shell Group of Companies and US-based Weather Ford to study depleting layers of hydrocarbon assets of the company and arrest the production decline. Shell has been actively studying the North Kadi region under ONGC for increasing productivity.