State-owned Oil and Natural Gas Corp (ONGC) has sent an urgent message to Petroleum Ministry, saying the natural gas prices according to a formula approved by the BJP-led Government was not viable to develop its KG basin discoveries. ONGC plans to invest multi-billion dollars in bringing to production its Krishna Godavari (KG)-basin oil and gas discoveries by 2018-19.
“We have requested the Government for review of gas prices because at these prices the gas development is not viable,” ONGC Chairman and Managing Director Dinesh K Sarraf told reporters here. The BJP-led Government had in October 2014 approved a new pricing formula based on average rate prevailing in gas surplus countries like the US, Russia and Canada for domestically produced natural gas. The rate, according to this formula, comes to $4.24 per million British thermal unit currently. This price, Sarraf said, is not enough to support multi-billion dollar investment for developing the gas finds, most of which are in deepsea and difficult areas. “$4.24 is definitely not viable,” he said.
ONGC has submitted to oil regulator DGH a field development plan (FDP) for beginning oil and gas production from its KG-D5 block by 2018-19 but the plan does not include any investment number, he added.
“We are yet to freeze that number,” he said. The FDP is for one set of oil and gas discoveries made in the eastern offshore Block KG-DWN-98/2 or KG-D5, which sits next to Reliance Industries' flagging KG-D6 area.