 "Need $6-7.15 gas price to break-even, says ONGC")
New Delhi: Pitching for a higher remunerative price for natural gas, state-owned Oil and Natural Gas Corp (ONGC) has said it needs $6-7.15 to break-even on gas it plans to produce from its most prolific KG basin block.
In its submission to the four-member panel of secretaries working out a new gas pricing mechanism, ONGC said in 2013-14 its cost of gas production, after including return on capital,came to $4.43 per million British thermal unit, higher than the current price of $4.2.
For new fields and raising output from the matured and ageing fields, higher capital outlays are required which can be viable only at higher rates.
[caption id=“attachment_87920” align=“alignleft” width=“380”]  Image taken from website[/caption]
ONGC said it will need a gas price of between $5.25 to $17.80 per mmBtu to break-even on 40.54 billion cubic meters of production planned from seven small and marginal fields in the western offshore.
For its prime Krishna Godavari basin KG-DWN-98/2 block, which sits next to Reliance Industries’ KG-D6 block, ONGC said the break-even price needed is $5.99 per mmBtu. For the ultra-deep sea UD-1 discovery in southern part of the block, the break-even price needed is $7.15, it said.
About 20.34 billion cubic meters of gas from its Mahanadi basin blocks MN-OSN-200/2 and MN-DWN-98/3 would need a break-even rate of $15.30 per mmBtu, it said.
“Most of ONGC’s major producing fields are more than 35 years old. These fields have crossed their plateau level and are no natural decline. Maintaining production levels from these fields, through improved oil recovery and enhanced oil recovery schemes, is highly capital intensive thereby increasing marginal cost of production,” ONGC said.
Stating that cost of production has increased significantly over the years, it said the rupee depreciation against the US dollar and increase in cost of oilfield equipment and services has made development of hard to produce oil and gas from marginal/small/isolated fields much costlier.
On discoveries in NELP blocks of KG-DWN-98/2 and Mahanadi basin, it said, “the cost of development and production from these fields are significantly high thus making them economically unviable at current gas price.”
Any gas not produced by ONGC by virtue of being economically not viable at existing price has to be substituted by imported LNG at considered higher rates.
“Accordingly, a higher remunerative price is well justified for developing these fields, failing which these gas reserves may remain unexploited,” ONGC added.
Stating that the existing pricing regime would leave a cash shortfall of more than Rs 86,000 crore by 2018-19, it said, “price of natural gas may be suitably revised so that ONGC is able to produce gas from deepwater/small/marginal fields and also able to generate sufficient funds to meet out its plans for energy security of the country.”
PTI
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