‘sus­tain­able price Of Gas Is needed TO achieve The Goal’

Resource Digest - - RESOURCE DIGEST -

ONGC Chair­man Di­nesh K Sar­raf said the coun­try will start pro­duc­ing oil from a new basin in western In­dia in two years, a ma­jor step for­ward for com­pany. In an in­ter­view, Sar­raf said he does not mind if the gov­ern­ment puts in place reg­u­la­tions to pro­tect the in­ter­ests of cer­tain gas con­sumers, but on the whole, the sec­tor should be free from price con­trols. Ex­cerpts:

YOU HAVE SPENT TWO-AND-A-HALF YEARS AS THE HEAD OF ONGC. YOU HAVE A YEAR LEFT. WHAT WOULD YOU LIKE YOUR SUC­CES­SOR TO RE­MEM­BER YOU?

First thing that was done (un­der me) was a dif­fer­ent type of fo­cus on ex­plo­ration. The pro­cesses for the re­lease of ex­plo­ration lo­ca­tions -we made it mul­ti­lay­ered, it will take more time, but is al­ways bet­ter to get ev­ery­one's in­put. We got the re­sult from this be­cause the suc­cess rate of the com­pany has in­creased, the com­mer­cial ben­e­fit from ex­plo­ration in­creased. And then (we) fo­cused on cer­tain area for ex­plo­ration that we wanted to nur­ture. For ex­am­ple, we iden­ti­fied Kutch, Saurash­tra. After early 80s, no new basin has come into pro­duc­tion in In­dia. The type of ex­ploratory ef­forts that we have seen in Saurash­tra, we feel that this will be­come a pro­duc­ing basin in the next 2 years.

In a re­cent in­ter­view, the oil min­is­ter ex­pressed con­cern about ONGC, say­ing the com­pany needed hand­hold­ing.

As com­pany, we should be thank­ful to the gov­ern­ment for how much they have done for the in­dus­try in the past two and a half years. They (gov­ern­ment) are the ma­jor share­hold­ers with 69% and if they are point­ing out cer­tain weak­nesses to us, there is noth­ing wrong in that.

WHAT DO YOU EX­PECT THE GOV­ERN­MENT TO DO FOR YOU?

4,500 per First, take the cess. It worked to about $9. And we wanted some re­duc­tion be­cause crude oil prices had come down. This 4,500 was (when crude was ) at $100-120 also.so we wanted this to be scaled down to a per­cent­age of the crude price. We sug­gested it could be 8-10%. They ac­cepted the first thing that it would be per­cent­age, but put the per­cent­age at 20, mean­ing that when prices go be­yond $45-50, it starts hit­ting us back. So the gov­ern­ment can help not just ONGC but also the in­dus­try by re­duc­ing the ad val­orem cess rate.

From Novem­ber 2014, gas price was linked to cer­tain mar­kets glob­ally, now, mar­kets are, after all mar­kets, and they are dy­namic. And the price we get to­day is $2.5 only. So we be­lieve that gov­ern­ment needs to re­con­sider this be­cause the new ex­plo­ration, de­vel­op­ment can be en­cour­aged if prices are bet­ter. So we have taken up the mat­ter with the gov­ern­ment. There is no doubt that they would con­sider this as­pect also at an ap­pro­pri­ate time.

YOU WANT A DIF­FER­ENT FOR­MULA OR A FLOOR PRICE?

Ul­ti­mately, we want higher dol­lars. Whether it is a for­mula or a price, they will decide. But as far as we are con­cerned, we want a sus­tain­able price of gas so that more and more work can be done to­wards the goal, which the hon­ourable prime min­is­ter has put be­fore us. And now we are mak­ing the case be­fore the gov­ern­ment that the gas prices could be dereg­u­lated. But again, the gov­ern­ment's con­cern would be how to pro­tect con­sumer in­ter­est. And some reg­u­la­tory mech­a­nism can be put in place to pro­tect the in­ter­est of the con­sumers.

NOW THAT SHAH PANEL HAS SUB­MIT­TED ITS RE­PORT. IS THE COM­PANY NOW OUT OF THIS, LEAV­ING THE BALL IN THE COURT OF GOV­ERN­MENT?

It has been es­tab­lished in the Shah Com­mit­tee re­port by the tech­ni­cal study of D&M that gas did mi­grate. The mi­grated gas has been pro­duced. Now the sec­ond as­pect, whether we get the money from this or gov­ern­ment gets the money, I think is a sec­ondary ques­tion from my per­spec­tive.

YOU ARE THE BIG­GEST SHARE­HOLDER IN PANNA MUKTA TAPTI FIELDS AND COM­PA­NIES SUF­FERED A BIG LOSS IN AR­BI­TRA­TION. WHAT WOULD ITS FI­NAN­CIALLY IM­PACT ONGC?

We are not party to the ar­bi­tra­tion. Un­til we see the judg­ment for­mally, we won't be able to com­ment.

PRO­DUC­TION AT VANKOR FIELD IN RUS­SIA, WHERE ONGC AND OTHER STATE FIRMS HAVE IN­VESTED, HAS FALLEN FROM 440,000 BAR­RELS PER DAY TO 410,000 BPD IN ABOUT A YEAR. HOW IS THE PRO­DUC­TION CURVE MOV­ING?

This is the na­ture of the oil field. When we bought this, it was al­most at the peak. All these things (the de­cline rate etc) have been fac­tored into val­u­a­tion. Even if more in­vest­ment were needed (to raise out­put), it's not go­ing to be a sig­nif­i­cant in­vest­ment. And these can be done out of the rev­enue of the field. The pro­duc­tion would de­cline, but de­cline rate is gen­tle.

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