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
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.
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