ONGC to gain Rs 16,000-crore revenue from gas price hike

Mar 05 2014, 03:50 IST
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SummaryONGC, the nation's largest producer of gas at 64 million standard cubic metres per day...

State-owned ONGC, the biggest beneficiary of near doubling of gas price from April, on Tuesday said it will gain an additional Rs 16,000 crore in revenue because of the new price, which may not be enough to make all its discoveries viable.

ONGC, the nation's largest producer of gas at 64 million standard cubic metres per day, will get Rs 16,000 crore in incremental revenue from gas price rising from $4.2 to about $8 per million British thermal unit, the company's new chairman and MD Dinesh K Sarraf said.

"Every dollar increase in gas price results in Rs 4,000 crore additional revenue on an annual basis. On a $4 increase, additional revenue would be Rs 16,000 crore and increase in net profit will be Rs 9,600 crore," he said.

However, most of this additional revenue would flow back to the government in form of higher taxes, royalty and dividend. "It may appear to be a significant increase but over one-third of the additional income will go back to the government. Our net retenti-on will be Rs 5,200 crore," he said.

Sarraf said the higher gas price will make many of its gas discoveries on the eastern offshore viable. "Our prolific KG-DWN-98/2 block will be now viable." The KG-DWN-98/2, which lies close to Reliance Industries' dwindling KG-D6 block and where gas finds were made over a decade back, will produce 25-30 mmscmd of gas from 2017, he said.

ONGC director (exploration) NK Verma said while the new gas price will make discoveries in KG-DWN-98/2 viable, some in Mahanadi basin block will still be unviable to production. “In Mahanadi basin, we have 26 billion cubic metres of gas (less than one trillion cubic feet) reserves which are viable to be produced only if the price is $11," he said. Like KG-DWN-98/2 where field development plan could not have been prepared at current $4.2 rate, the Mahanadi basin gas finds will have to wait for the right price. "Some of the gas may not be produced even at $8. It will be monetised at a later stage," Sarraf said. ONGC's Vashista gas discovery in Krishna Godavari basin was viable at $6.7, he said.

Asked about claims made by AAP that cost of gas production is just $1, he said production cost is not just operating cost but also exploration cost, development expenditure, facilities expense and interest cost.

ONGC's cost of gas production is about $4 per million British thermal

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