ONGC sells initial gas from KG basin to Torrent, GAIL at $11: Report | Mint
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Business News/ Companies / ONGC sells initial gas from KG basin to Torrent, GAIL at $11: Report
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ONGC sells initial gas from KG basin to Torrent, GAIL at $11: Report

ONGC sold 1.4 million standard cubic meters per day - a fraction of the planned output from the block that sits next to Reliance Industries' KG-D6 area in the Bay of Bengal, to Torrent Gas Pune, GAIL, and HPCL.

ONGC has sold initial gas it is producing from its KG basin fields to three firmsPremium
ONGC has sold initial gas it is producing from its KG basin fields to three firms

State-owned refinery Oil and Natural Gas Corporation (ONGC) has sold initial gas produced from its KG basin fields in the Bay of Bengal to three firms, including Torrent Gas, according to a report by news agency PTI. In an e-auction, the public-sector undertaking (PSU) sold 1.4 million standard cubic meters per day - a fraction of the planned output from the block that sits next to Reliance Industries' KG-D6 area in the Bay of Bengal, to Torrent Gas Pune Ltd, GAIL (India) Ltd and Hindustan Petroleum Corporation Ltd (HPCL).

GAIL picked up 0.8 mmscmd while HPCL took 0.42 mmscmd and Torrent 0.12 mmscmd. ONGC had sought bids from users like city gas operators that sell compress natural gas (CNG) to automobiles and pipe cooking gas to households, companies using gas to produce fertiliser or make electricity, LPG producers and traders, for the gas from its KG-DWN-98/2 or KG-D5 block.

Also Read: ONGC Q4 Results: Cons PAT falls 53% to 5,701 crore, revenue up 5%; dividend declared

The tender document showed that ONGC asked companies to quote a premium 'P' that they are willing to pay over and above the rate arrived at by calculating 14 per cent prevailing Brent oil price plus $1 per million British thermal unit. At the current Brent crude oil price of $74 per barrel, the base price comes to $11.3 per mmBtu ($10.36 per mmBtu at 14 per cent of Brent oil price plus a mark-up of $1).

The sale price will however be the lower of the price arrived at using this formula or the rate that oil ministry's arm Petroleum Planning and Analysis Cell (PPAC) notifies twice a year for the deep sea fields. The ceiling price for difficult to produce fields like deepsea for six months starting April 1 is $12.12 per mmBtu.

The gas price for Torrent and others would be $11.3 per mmBtu. The company has again delayed the start of production from the main fields in the block. ONGC was originally to start gas production from Cluster-II fields in the KG-D5 in June 2019 and the first oil was to flow in March 2020.

The company blamed contracting and supply chains issues due to the pandemic for shifting the start of oil production first to November 2021, then to the third quarter of 2022 and then to June 2023. Gas output start target was first revised to May 2021, then to May 2023 and then to May 2024 for non-associated gas to start flowing.

However, these timelines have now been shifted to August. A floating production unit, called FPSO, which will be used to produce oil, is already in Indian waters. ONGC will start with 10,000 to 12,000 barrels per day and reach the peak of 45,000 bpd in 2-3 months, they said adding some gas would also flow with oil but actual gas output will start in May 2024 when 7-8 mmscmd production is expected.

The production estimates are however much lower than what was originally projected. At the time of its launch in April 2018, ONGC had said the estimated capital expenditure would be $5.07 billion and operational expenditure would be $5.12 billion over a field life of 16 years.

The block has a number of discoveries that have been clubbed into three clusters -- Cluster-1, 2 and 3. Cluster 2 is being put to production first. Cluster 2 field is divided into two blocks namely 2A and 2B, which as per the original investment decision were expected to produce 23.52 million metric tonnes of oil and 50.70 billion cubic metres (bcm) of gas over the life of the field.

Cluster 2A was estimated to contain reserves of 94.26 million tonnes of crude oil and 21.75 bcm of associated gas, while Cluster 2B is estimated to host 51.98 bcm of gas reserves, according to PTI.

Cluster 2A was estimated to produce 77,305 barrels of oil per day (bopd) and associated gas at a rate of 3.81 million metric standard cubic metres per day (mmscmd) over 15 years. Cluster 2B is expected to produce free gas of 12.75 mmscmd from eight wells and has a 16-year life.  But now, the output estimate is lower - 45,000 bpd of oil and up to 2.5 mmscmd from Cluster 2A and around 9 mmscmd from Cluster 2B, according to PTI. 

Earlier this month, ONGC announced that it has successfully linked Panna oilfield in the Arabian Sea to shore through a sub-sea pipeline, helping save $43,000 a day in cost that was previously incurred in transporting crude oil through ships.

In the January-March quarter of fiscal 2022-23, ONGC reporting a consolidated net profit of 5,701 crore, down 53 per cent, compared to 12,061 crore in the corresponding period last year. The petroleum giant's revenue from operations during Q4FY23 stood at 164,066.72 crore, registering a growth of five per cent, compared to 155,946.99 crore in the year-ago period.

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Published: 29 Jun 2023, 06:31 PM IST
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