Cen­tre moots steps to un­lock ONGC, OIL gas

Cos to get spe­cial in­cen­tives for dis­cov­er­ies in dif­fi­cult, un­vi­able ar­eas

The Free Press Journal - - BUSINESS -

The govern­ment plan to of­fer state-owned com­pa­nies spe­cial in­cen­tives for nat­u­ral gas dis­cov­er­ies in dif­fi­cult and un­vi­able ar­eas will help raise In­dia's nat­u­ral gas pro­duc­tion as it will un­lock out­put in a dozen fields of Oil and Nat­u­ral Gas Corp (ONGC) and Oil In­dia (OIL), of­fi­cials said on Sun­day.

In­dia cur­rently pro­duces about 90 mil­lion stan­dard cu­bic me­ters per day (mm­scmd) of nat­u­ral gas and has am­bi­tious plans to dou­ble out­put by 2022 to re­duce its re­liance on im­ports and re­place some of the pol­lut­ing liq­uid fu­els to cut emis­sions.

Speak­ing on the side­lines of the Petrotech con­fer­ence here on the out­skirts of Delhi, of­fi­cials said ONGC and OIL have a dozen dis­cov­er­ies, which are un­vi­able at cur­rent govern­ment man­dated gas price.

These finds, they said, need a higher price and the govern­ment plans for spe­cial in­cen­tives for them would help bring them to pro­duc­tion quickly.

Oil Min­is­ter Dhar­men­dra Prad­han had last month stated "spe­cial in­cen­tive be­sides the in­cen­tive al­ready pro­vided" will be given to dif­fi­cult fields of ONGC.

"We don’t know what that in­cen­tive will be, but we pre­sume it will be a higher and re­mu­ner­a­tive price," an of­fi­cial said. State-owned ONGC and OIL have not been able to de­velop the dis­cov­er­ies or bring them to pro­duc­tion as the cur­rent gas price of $3.36 per mil­lion Bri­tish ther­mal unit (MMBtu) is way lower than the cost of pro­duc­tion.

Of­fi­cials said ONGC has about 35 bil­lion cu­bic me­ters of re­cov­er­able re­serves in dis­cov­er­ies in the shal­low sea off Andhra Pradesh on the east and off Gu­jarat and Mum­bai on the west coast blocks. The three blocks in Kr­ishna Go­davari basin, Gulf of Kutch and Mum­bai off­shore can pro­duce about 10 mm­scmd of gas and an equiv­a­lent amount can be pro­duced from its on­shore dis­cov­er­ies in blocks like Ban­tu­mili, Man­dapeta and Bhu­vana­giri, they said.

About 5 mm­scmd of pro­duc­tion can be added by mak­ing some in­vest­ment in ex­ist­ing fields like Mum­bai High South, Nee­lam and B127 Clus­ter in the Ara­bian Sea.

Oil In­dia (OIL) has an on­land dis­cov­ery in the Kr­ishna Go­davari basin in Andhra Pradesh with over 3 bil­lion cu­bic me­ters of re­cov­er­able re­serves, but needs a higher price to bring it to pro­duc­tion.

The of­fi­cials said all these fields can be ex­pe­di­tiously de­vel­oped and mon­e­tised in case pric­ing and mar­ket­ing free­dom is granted by the govern­ment. ONGC and OIL want a price of over $6 per MMBtu to help them pro­duce the gas with­out suf­fer­ing any losses. In the ab­sence of a vi­able gas price, they will have to moth­ball $3 bil­lion projects, the of­fi­cials said.

The BJP-led govern­ment had in Oc­to­ber 2014, evolved a new pric­ing for­mula us­ing rates preva­lent in gas sur­plus na­tions like US, Canada and Rus­sia to de­ter­mine price in a net im­port­ing coun­try.

Prices us­ing this for­mula are cal­cu­lated semi-an­nu­ally. While the govern­ment has al­lowed a higher rate of $7.67 per mmBtu for gas fields in dif­fi­cult ar­eas like the deep sea, ONGC's Kr­ishna Go­davari basin block KG-OSN2004/1, which has about 15 bcm of re­cov­er­able re­serves, is in shal­low wa­ters and does not qual­ify as a 'dif­fi­cult field'. Sim­i­lar is the fate of Mum­bai basin block MBOSN-2005/1 on the west­ern side. The block GK-28/42 in Gulf of Kutch is a nom­i­na­tion block which does not qual­ify for higher rates, they said. The on­land dis­cov­er­ies of ONGC and OIL too do not qual­ify for the higher rates. While ONGC's KG block can pro­duce a peak out­put of 5 mm­scmd, the same from GK28/42 is ex­pected to be around 2.5 mm­scmd.

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