In other words, ONGC wants international crude oil prices for oil sold from marginal fields, and does not want to contribute $63 per barrel towards subsidies as it currently does on oil sold from all its fields in India. ONGC holds around 336 million tonnes of oil equivalent (mtoe) of oil and gas ultimate recoverable reserves in 165 marginal fields of its total 2,764 mtoe reserves.
Vasudeva said the company has made requests to the oil ministry to exempt it from subsidy but has so far not received the go-ahead. ONGC is struggling to produce from marginal fields due to the realisation being low, approximately $42 per barrel.
The cost of production from marginal fields is higher than the companys average realisation of $42-43 per barrel of oil.
Vasudeva pointed out that it needs a minimum price of $65 per barrel, without which the investments planned for marginal and ageing fields will not be commercially viable.
Marginal fields were allotted to ONGC before the start of the new exploration licensing policy (NELP) rounds began in 1999. These fields hold large quantities of hydrocarbons but are not able to produce economically on a standalone basis.
The marginal fields consist of 64 fields on production including the D 1 fields, C series B 22 cluster and North Tapti fields. The remaining fields are either under exploration, monetisation or hub development.
ONGC has created several clusters to jointly develop these marginal fields. ONGC is developing 37 marginal fields through 13 projects with an estimated investment of Rs 34,223 crore. Production from the fields under projects G-1 & GS-15, B-22 Cluster, B-46 Cluster, C-Series, North Tapti and additional development of the D-1 field has already commenced. Seven out of these 13 projects are expected to be completed this year and the remaining five in subsequent years.
Vasudeva said that apart from marginal fields, the company is dealing with ageing fields for which it is constantly undertaking improved oil recovery (IOR) and enhanced oil recovery (EOR) schemes. The company has sought tax sops on the ageing fields. Around 75% of ONGCs production today comes from just 15 fields. This includes fields like Ankleshwar and Rudrasagar which were discovered in 1961 and started producing in that year. Also, its main producing asset, Mumbai High, which discovered in 1974, is still producing.
Currently, ONGC offers oil retailers a discount of $63 per barrel on crude oil sold to oil retailers IOC, BPCL and HPCL for selling diesel, kerosene and LPG at discounted levels. The government compensates retailers for the remaining under-recovery that retailers incur. Over the last two quarters the company has had an average realisation of around $42 per barrel, leaving it with small margins on its oil business where the cost of production stands at around $40 per barrel.