ONGC is banking on natural gas production to propel its future growth as industries wake up to the significance of the clean fuel in the fight against global warming. Gas production has become a profitable business for the company after the recent revision of administered (APM) prices. Margins are projected to go up further, as the country’s pipeline network widens, releasing suppressed demand for gas.
ONGC, interestingly, is adding more reserves of gas than crude oil to its asset portfolio. That would mean a higher share of gas in the company’s revenue in the years ahead. ONGC expects to increase natural gas production to 100 million standard cubic meter per day (mmscmd) by 2015 from 60 mmscmd now. “We have added gas reserves at a much faster pace in recent years compared to crude oil,” DK Pandey, ONGC’s director for exploration, told FE. “Natural gas is a clean source of energy and environment friendly. It is also becoming profitable now,” Pandey said.
When the government fixed the price for natural gas from Reliance Industries’ D6 field in the Krishna-Godavari basin at $4.2 per mmBtu in 2007, it was seen as fairly high then, given that RIL had quoted $2.34 per mmBtu in an opening bidding for the supply of 12 mmscmd gas to NTPC’s Kawas and Gandhar projects in 2003.
But more recently, the government has set a gas price for Gujarat state Petroleum Corporation’s DeenDayal field in the K-G basin at $5.7 per mmBtu. Now RIL is also pushing for a higher gas price for D6.
Global upstream investment saw an 18% decline in 2009 as the industry was forced to cut down on its spending in the face of economic recession. In contrast, ONGC maintained its exploration pace. That has helped the company clock the highest ultimate reserve accretion in the last two decades.
ONGC added 83 million tonnes of oil and oil equivalent gas reserves in the fields operated by it in 2009-10. On a cumulative basis, ONGC has added over 250 million tonnes of oil and oil equivalent reserves in the last four years.
“Being a national oil PSU, we have to keep investing in exploration,” Pandey reasoned. ONGC has set a capital expenditure target of Rs 1,30,000 crore for the 11 th Plan—a 47% hike over the previous plan.
The company has already spent about 67% of the allocated fund during the first three years of the Plan. It has earmarked about Rs 24,000 crore for financing its domestic exploration work in the current financial year. At this pace, ONGC is likely to exceed the exploration spending target for the current Plan.
The company has targeted to drill 154 exploratory wells compared with 128 in 2009-10. The ten-year average success rate for the company works out to 1:2.5, which compares favourably with the industry ratio of 1 to 3. “Giant fields are discovered only in virgin areas. It is our mandate to explore the hydrocarbon potential of all sedimentary basins in the country,” the ONGC director explained
Source: Financial Express
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