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Business News/ Industry / Energy/  Govt’s gas pricing formula not viable to develop Krishna Godavari basin gas: ONGC
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Govt’s gas pricing formula not viable to develop Krishna Godavari basin gas: ONGC

Oil and Natural Gas Corporation chairman Dinesh K. Sarraf says they have requested the government for review of gas prices

Photo: BloombergPremium
Photo: Bloomberg

New Delhi: State-owned Oil and Natural Gas Corp. Ltd (ONGC) has sent an urgent message to the petroleum ministry, saying the natural gas prices according to a formula approved by the Union government was not viable to develop its Krishna Godavari (KG) basin discoveries.

ONGC plans to invest multi-billion dollars in bringing to production its KG basin oil and gas discoveries by 2018-19.

“We have requested the government for review of gas prices because at these prices the gas development is not viable," ONGC chairman and managing director Dinesh K Sarraf told reporters in New Delhi.

The government had in October 2014 approved a new pricing formula based on average rate prevailing in gas surplus countries such the US, Russia and Canada for domestically produced natural gas. The rate, according to this formula, comes to $4.24 per million British thermal unit currently.

This price, Sarraf said, is not enough to support multi-billion dollar investment for developing the gas finds, most of which are in deep sea and difficult areas. “$4.24 is definitely not viable," he said.

ONGC has submitted to oil regulator directorate general of hydrocarbons a field development plan (FDP) for beginning oil and gas production from its KG-D5 block by 2018-19, but the plan does not include any investment number, he added. “We are yet to freeze that number," Sarraf said.

The FDP is for one set of oil and gas discoveries made in the eastern offshore Block KG-DWN-98/2 or KG-D5, which sits next to Reliance Industries Ltd’s KG-D6 area.

“We are looking at producing 77,000 barrels per day of oil and 14 million standard cubic meters per day of gas from the first set of discoveries by 2018-19," Sarraf said.

The 7,294.6 sq. km. deep sea KG-D5 block has been broadly categorized into northern discovery area (3,800.6 sq. km.) and southern discovery area (3,494 sq. km.).

ONGC has divided 12 oil and gas discoveries in KG-D5 and gas discovery in an adjacent G-4 block in the Bay of Bengal into three clusters to quickly bring them to production. PTI

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Published: 05 Feb 2016, 12:42 AM IST
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