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