The price ceiling for gas produced from difficult fields (also called high-pressure high-temperature fields) was revised upward by 7.6% from $6.30 per MMBTU to $6.78 per MMBTU.
While ONGC has written to the government seeking ‘marketing freedom’ for gas produced from its block in the Krishna-Godavari (KG) basin (KG-OSN-2004/1) to be able to sell the product at a higher price, the oil explorer has been asked to prove that at least 50% of the fields in the block are in deep water in order to get a special pricing dispensation.
According to ONGC sources, the company wants either arm’s length price for the gas from the above mentioned block or a government-fixed price for products from difficult fields which should be higher than that for shallow-fields gas. The company, they said, has written again to the upstream regulator Directorate General of Hydrocarbons (DGH) pressing this demand.
An arm’s length price is arrived at through transparent and competitive bidding. The government in March, 2018 increased the price of domestic natural gas in shallow fields by 6% to $3.07 per MMBTU as per gross calorific value for the April-September, 2018 period from $2.89 per MMBTU during October 2017-March 2018 period.
The price ceiling for gas produced from difficult fields (also called high-pressure high-temperature fields) was revised upward by 7.6% from $6.30 per MMBTU to $6.78 per MMBTU. The landed cost of imported liquefied natural gas for India is around $10 per MMBTU. The depth of the fields in the said block ranges from around 6 metres to as much as 380 metres. As per the government’s policy, however, only those fields are considered difficult, which have a minimum depth of 400 metres.
The board of ONGC had approved the work programme for the field in March, 2017 else the company would have been forced to relinquish the block. However, it had asked the government for special pricing given — in the company’s view — the then-prevailing price of $2.89 per MMBTU was too low to make the required investments of around $600 million in the block commercially prudent. Even the revised price of $3.07 per MMBTU is not enough, said an ONGC executive.
The DGH in its response told the state-run firm that it can be given the special privilege only if at least half of the fields in the block are proved to be in deep water. ONGC, however, argued that production from ultra-shallow fields is equally difficult. “An ultra-shallow field is as difficult as a deep-water field. At depths of 5-6 metres, there are hardly rigs available which can operate. We have asked that ultra-shallow fields should also be considered as challenging as deep water,” said another ONGC executive.
The KG-OSN-2004/1 block has ultra-shallow, shallow and deep-water fields. The expected peak production from the block is 5.35 million metric standard cubic meter per day of natural gas by 2020, in case the production starts as per schedule.