Subsidy payments make an eighth of ONGC’s oil & gas fields unviable

Jan 09 2014, 01:22 IST
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ONGC holds around 336 mn tonnes of oil equivalent of oil and gas ultimate recoverable reserves in 165 marginal fields of its total 2,764 mtoe reserves. Reuters ONGC holds around 336 mn tonnes of oil equivalent of oil and gas ultimate recoverable reserves in 165 marginal fields of its total 2,764 mtoe reserves. Reuters
SummaryOil ministry officials say that they are considering the request.

Given over 12% of Oil and Natural Gas Corporation’s (ONGC) ultimate recoverable reserves are located in marginal oil and gas fields that are becoming unviable to produce from, the PSU major is counting on an exemption from subsidy contribution to make the economics for these work, ONGC chairman Sudhir Vasudeva told FE. Oil ministry officials say that they are considering the request.

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 company’s 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

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