IT’S A ‘CHAL­LENGE TO DE­VELOP FIELDS AT CUR­RENT PRICE’

ONGC CHIEF SAYS COM­PANY TO GO AHEAD WITH DE­VEL­OP­MENT PLAN FOR FIELDS OFF AP COAST

Resource Digest - - MINING -

De­vel­op­ment of gas fields at cur­rent prices will be a ‘chal­lenge’, ac­cord­ing to ONGC’s Chair­man and Man­ag­ing Di­rec­tor D K Sar­raf. “At cur­rent prices of gas, things are chal­leng­ing in the ex­plo­ration and pro­duc­tion sec­tor. Gas is even more of a chal­lenge but the tough­est chal­lenge is deep­wa­ter gas fields,” said Sar­raf. Talk­ing to me­dia af­ter the com­pany’s An­nual Gen­eral Meet­ing, Sar­raf hinted that at cur­rent rates pro­duc­tion from its deep­wa­ter fields in the east­ern off­shore re­gion of In­dia will not be vi­able.

Do­mes­tic gas prices are cur­rently at $4.66 per mil­lion Bri­tish ther­mal units on a gross calorific value ba­sis.

How­ever, th­ese prices are ap­pli­ca­ble till Septem­ber 30. The new price ef­fec­tive Oc­to­ber 1 is ex­pected to be lower than the pre­vail­ing price.

FLUC­TU­AT­ING PRICES

But, Sar­raf and his team re­main op­ti­mistic stat­ing that it is dif­fi­cult to pre­dict what the price will be three years later.

The com­pany has de­cided to go ahead with its field de­vel­op­ment plan for two of its fields off the Andhra coast, though it would need to work out a more cost-ef­fi­cient in­vest­ment plan.

“We have pre­pared a field de­vel­op­ment plan. To get it ap­proved at cur­rent prices is chal­leng­ing. “The board has al­lowed us to sub­mit the plan to the Direc­torate Gen­eral of Hy­dro­car­bons for now but it wants us to op­ti­mise the cost,” said Sar­raf.

When asked what is prompt­ing ONGC to make in­vest­ment plans at a time when most of the ex­plor­ers are cut­ting costs due to low oil prices, Sar­raf said his com­pany fol­lows the strat­egy of in­vest now to reap ben­e­fits when en­ergy prices re­bound.

“The strate­gies of dif­fer­ent ex­plo­ration and pro­duc­tion op­er­a­tors and how they re­spond to a mar­ket sit­u­a­tion will be dif­fer­ent be­cause of the fi­nan­cial strength that a par­tic­u­lar com­pany has and also the mind­set and con­vic­tion that they have on the things to come,” said Sar­raf.

OIL, GAS DIS­COV­ER­IES

The com­pany had ap­proved de­vel­op­ment projects, which would en­tail in­vest­ments of Rs. 20,000 crore in the pre­vi­ous fis­cal as well as re­de­vel­op­ment projects.

At the com­pany’s AGM, Sar­raf in­formed share­hold­ers that the com­pany made 22 oil and gas dis­cov­er­ies in 2014-15.

In the cur­rent fis­cal, it has al­ready com­pleted nine projects. Sar­raf claims the pace of work will con­tinue with 12 more projects to be com­pleted by May 2016, which would cost around Rs. 13,000 crore.

“We be­lieve that right now, costs are go­ing to be lower so far as oper­a­tions are con­cerned.

“It is also a time where there is more ac­cept­abil­ity within the com­pany for cost op­ti­mi­sa­tion and op­er­a­tional ef­fi­ciency, which we would do in a very struc­tured man­ner in the next few months, and thereby, op­ti­mise the cost of the as­sets we have.

“So long as one be­lieves that prices of oil will re­bound, one will take de­ci­sions that would be jus­ti­fied,” said Sar­raf.

D.K. SAR­RAF, CHAIR­MAN AND MAN­AG­ING DI­REC­TOR, ONGC

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