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  1. ONGC starts selling gas at ‘premium’

ONGC starts selling gas at ‘premium’

State-run ONGC has started selling natural gas from its East Coast field at a premium price of $6.61/mBtu, to be the first to benefit from the government’s policy to reward production from difficult fields

By: | New Delhi | Published: September 14, 2016 6:28 AM
State-run ONGC has started selling natural gas from its East Coast field at a premium price of .61/mBtu, to be the first to benefit from the government’s policy to reward production from difficult fields (Reuters) State-run ONGC has started selling natural gas from its East Coast field at a premium price of .61/mBtu, to be the first to benefit from the government’s policy to reward production from difficult fields (Reuters)

State-run ONGC has started selling natural gas from its East Coast field at a premium price of $6.61/mBtu, to be the first to benefit from the government’s policy to reward production from difficult fields, reports Siddhartha P Saikia in New Delhi. In March, the government had allowed higher price for new gas production from deep, ultra deepwater and high pressure, high temperature areas.

The current gas price for regular fields is $3.06/mBtu on a gross calorific value basis.

“Happy that ONGC started sale of gas from its deepwater field for first time at market price taking benefit of March 10 Cabinet decision,” petroleum minister Dharmendra Pradhan tweeted.

ONGC has started selling natural gas from the first development well at the S1-Vashishta gas fields located in the Krishna-Godavari (KG) offshore basin. This is a deep water field and current production is hovering 0.6 mmscmd.

The output from the field is likely to go up to 3-4 mmscmd after complete development work. The gas is being sold to GAIL (India). Considering an output of 4 mmscmd for a full year at a price of $6.61/mBtu, ONGC would earn revenues to the tune of Rs 2,300 crore against Rs 1,100 crore at a normal gas price of $3.06/mBtu.

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In FY16, ONGC approved projects worth Rs 47,906 crore to develop 33.662 million tonnes of crude oil and 63.956 bcm of reserves. The chunk of it would go towards development of cluster 2 of its KG-basin deep water block — KG-DWN-98/2, which would cost Rs 34,012 crore.

The price of domestic natural gas is currently decided based on a formula approved by the Modi government in October 2014, which is linked to select global indices.

However, the government in March 2016 approved a mechanism that allows pricing freedom to gas production from high pressure, high temperature, deep and ultra deep water blocks. The only caveat is the ‘market price’ is subject to a ceiling to be derived from landed cost of alternate fuels such as fuel oil, naptha, LNG and coal.

The new pricing formula will apply to gas projects already discovered but are yet to commence production because of un-remunerative pricing of the commodity.

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