State-owned Oil and Natural Gas Corporation (ONGC) said on Thursday that natural gas production from the Krishna-Godavari basin was not viable at the current sale price of $4.2 per million metric British thermal unit (mmBtu).

The exploration and production giant, which has identified 10 gas finds in the K-G basin off the Andhra coast, wants more than $7 per mmBtu for gas. ?I am categorically stating that current price levels are not viable to make investments,? ONGC CMD RS Sharma said here.

The government has set $4.2 per mmBtu as the sale price of gas from RIL?s K-G D6 block (KG-DWN-98/3) for five years. This price now considered as a benchmark, is lower than $5.65 per mmBtu that gas from the Panna/Mukta and Tapti fields command, the highest priced domestic gas.

?This ($4.2 per mmBtu) is not a viable price for making future investments. Nobody in the world makes investments at these price levels,? he said.

ONGC plans to begin gas production from KG-DWN-98/2 block in 2015-16. Around 20-25cubic metres a day of peak production is expected. On the price level that ONGC would be comfortable with, Sharma said it should certainly be ?higher than current rates ($4.2) but lower than LNG import price ($9 per mmBtu). When asked if $ 6-7 per mmBtu was an acceptable price, he said, ?it could be even higher than that.?

ONGC is planning to invest a minimum of $5.3 billion in developing gas finds in two of its eastern offshore K-G basin blocks to produce 25 million standard cubic meters per day of gas. Besides natural gas, ONGC also plans to produce 8,000 barrels of oil per day from the fields.

Meanwhile, Sharma said ONGC is in talks with major oil companies to replace Norway?s Statoil and Petrobras of Brazil who have decided to exit from ONGC?s K-G basin gas block. ?We are talking to a lot of people,? Sharma said. Statoil and Cairn India hold 10% each in the block and Petrobras 15%. ONGC holds the rest 65%. ?We are looking at firms for technology (to produce gas from ultra deep sea) and risk sharing,? ONGC director (finance) Dinesh K Sarraf said.

Petroleo Brasileiro SA or Petrobras, Brazil?s state-controlled oil firm, has offered ONGC its 15% interest. Statoil has decided against participating in future drilling in the acreage off the Andhra coast.