ONGC invites bids for KG offshore gas

By: |
April 13, 2021 2:30 AM

State-run Oil and Natural Gas Corporation (ONGC) has floated the tender for prospective buyers to bid for gas supplied from its KG-DWN-98/2 field located in the east coast Krishna Godavari offshore field.

ONGCMore than 95% of the gas currently produced by ONGC are sold at government determined rates.

State-run Oil and Natural Gas Corporation (ONGC) has floated the tender for prospective buyers to bid for gas supplied from its KG-DWN-98/2 field located in the east coast Krishna Godavari offshore field. ONGC will supply two million standard cubic meters per day (mscmd) gas from the field to the Odalarevu onshore terminal in Andhra Pradesh, and buyers can book contracts for three to five years, starting June 30.

Bidders will have to quote prices linked to the contemporary rates of Brent crude oil, but ONGC will sell the gas at the government determined ceiling tariff for the fuel for difficult fields, which currently stands at $3.62 per million British thermal units (mBtu). First gas production from ONGC’s KG-DWN-982 deep-water project commenced on March 5, 2020. The field is expected to touch the peak production of 15 mscmd by FY24.

Domestic gas output fell 2.8% y-o-y to 31,168.4 million standard cubic meters in FY20, reversing the growth trend recorded since FY18 amid the ageing of existing fields and muted response from the industry to take up new projects. Production has, however, shown recent signs of revival with the commencement of production from Reliance Industries and BP’s ultra-deep-water field in the KG D6 Block on the east coast of India.

The ceiling price of domestic gas is fixed by the government every six months, and in the latest revision on March-end, rates were kept unchanged at the current all-time low rate of $1.79/mBtu. However, the ceiling price for gas to be produced from difficult fields — which have higher pricing and marketing freedom — had been cut by 10.8% to $3.62/mmBtu.

More than 95% of the gas currently produced by ONGC are sold at government determined rates. The average gas output cost of ONGC — which produces about 80% of the domestic natural gas — is $3.7/mmBtu. ONGC had indicated earlier that it may face a loss of around `7,000 crore in FY21 from its gas businesses due to under-recoveries.

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