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Oil and Natural Gas Corporation Ltd (ONGC) has tested the first deep-water well at its largest block in the Krishna Godavari basin, said Rajesh Kakkar, director (offshore) of the state-run company.

The KG-DWN-98/2 block in the Bay of Bengal is one of ONGC’s biggest projects, with plans to invest up to $5 billion during the life of the asset that is expected to play a strategic role in India’s energy transition.

“We are working on a challenging project on the east coast, generally known as 98/2. Work has already begun on that. The first deep-water well has been tested. May be in the next couple of days or a in a week, regular flow from the well will be starting," Kakkar said at Mint’s annual Energyscape event in New Delhi on Monday.

India’s emerging green economy is reordering the country’s energy mix to meet its global climate change commitments. These sources include a combination of solar, wind, ultra super critical coal fuelled projects, gas based plants and nuclear power projects.

India is running what will become the world’s largest clean energy programme with the aim of achieving 175 gigawatts (GW) of clean energy capacity by 2022. Given the country’s ambitious green energy programme based on infirm sources such as wind and solar, its gas-based power generation capacity can be leveraged for providing grid stability and be the intermediary fuel for India’s energy transition.

“Liquid fuel, gas will be the mainstay beyond 2040 because of mobility and many such issues," Kakkar said.

India, the world’s fourth-largest importer of liquefied natural gas (LNG), is expanding its portfolio with domestic companies having inked long-term LNG contracts totalling 22 million tonnes per annum (mtpa). India consumes around 145 million standard cubic meters a day (mmscmd) of gas.

The outbreak of the Covid-19 has also thrown a lifeline to India’s stranded gas-fuelled power plants with global LNG prices plunging to less than $3 per million British thermal units (mmBtu) from a peak of $11.3/mmBtu in September 2018. Plant operators are looking to revive their gas-fired capacity, which accounts for 7%, or 24,937.22 megawatts (MW), of India’s total capacity.

A case in point is Gujarat, which plans to leverage the prevailing lower prices to kick-start its 2,200MW gas-fuelled projects that depend on imported gas, Mint reported earlier.

According to analysts, the epidemic has also brought good tidings for the city gas distribution (CGD) sector.

“The viability of 50,000 crore capital expenditure planned in the city gas distribution space over the next four years has improved with the price of LNG expected to be subdued during the period. LNG accounts for nearly half of CGD consumption volume and a lower price augurs well for both volumes and operating margins of distributors, and consequently, project returns," Crisil wrote in a report on Wednesday.

“Spot prices of LNG have more than halved on-year to a decadal low of less than $3 per mmBtu in February 2020 because of oversupply and more recently, the Coronavirus outbreak. That has sharply improved the competitiveness of piped natural gas (PNG) compared with furnace oil, liquefied petroleum gas (LPG) and gasoline, prices of which are typically linked to crude oil," the report added.

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