R.S. Sharma, chairman and managing director, ONGC

“There has been an in-principle agreement within the government that ONGC deserves higher gas price. We are awaiting a final decision now. We want to sell gas at a price of $2.5 (Rs100.75) per million British thermal units (mBtu). By doing so, we will gain Rs2,000 crore annually in revenues," R.S. Sharma, chairman and managing director of the company said.

The company is currently selling the gas at $1.90 per mBtu and is losing around Rs700 crore annually.

Mint had reported on 15 September that the government was considering such a move. Of the 90 million standard cubic metres per day (mscmd) of gas available in the country, around 53mscmd of gas is available at the administered price mechanism (APM) price; the entire gas available under APM is produced by ONGC (48mscmd) and Oil India Ltd (5mscmd).

While any increase in prices would reduce losses for ONGC and OIL, it would also increase fuel costs for power and fertilizer companies, and put pressure on them to pass the increase on to consumers.

“Any increase in the APM gas prices will have a negative impact on the power sector. In fact, for every $1/unit increase in the cost of gas, electricity costs will go up by 34 paise per unit," Shubhranshu Patnaik, an executive director at audit firm PricewaterhouseCoopers had earlier said.

Meanwhile, ONGC Videsh Ltd (OVL), the wholly owned subsidiary of ONGC and also its overseas acquisition arm, has won three offshore gas blocks in Colombia in association with the national oil companies of Colombia (Ecopetrol) and Brazil (Petrobras).

“While we are the operator in two blocks (with Ecopetrol), we are a partner in the third block along with Petrobras," R.S. Butola, managing director, OVL, said.

Consumption of petroleum products in India, the world’s fifth largest oil importer, is around 112 million tonnes a year. The country procures 78% of its energy needs from abroad. Soaring oil and gas prices have been a source of concern for India since 2005. In such a situation, acquiring equity in overseas oil and gas blocks has been a major focus area for the Indian companies led by OVL.

In another unrelated development, Sharma said ONGC could consider a bonus issue of shares and a share split in the future to reward shareholders and make the share more affordable.