ONGC targets 81% jump in gas output by 2019-20
State-run ONGC is targeting to hike its natural gas output by 81% to 116 million metric standard cubic metres per day (mmscmd) by 2019-20. Currently, ONGC producers roughly four-fifth of domestic gas.
The projection is being shared by the government-owned explorer with the ministry of petroleum and natural gas, sources said. The aggressive pitch to increase output follows petroleum minister Dharmendra Pradhan’s stern directions to the explorer to increase hydrocarbon production. ONGC’s production of oil and gas has been stagnant for the past few years, partly due to huge subsidy burden on the firm that forced it to cut on capital spending, but also, analysts say, bacause of a slippage in efficiency.
In order to achieve the new target for gas production, Dinesh K Sarraf, chairman and MD of ONGC, told FE that projects worth R22,500 crore in the western offshore have already been approved by the PSU’s board. Other projects worth nearly R30,000 crore for the East Coast are under advanced stages of execution and would be taken up by the board latest by March 30, he added. Incremental production is expected from KG basin (KG-DWN-98/2), Vashistha, Bassein and Daman fields.
ONGC’s most-talked-about project in the deepwaters of KG basin is advancing and Intec Sea of Malaysia has been assigned to prepare the field development plan. The firm would develop the northern discovery area (NDA) in the first phase and first gas is expected by 2018. “KG-DWN-98/2 project is being firmed up and would be considered for approval by the board in February 2015,” a senior petroleum ministry official told FE.
The biggest exploration company in India saw its standalone crude oil output falling from 24.67 million tonne in FY10 to 22.25 million tonne in FY14. Similarly, gas output has increased marginally from 23.11 billion cubic metres in FY10 to 23.28 billion cubic metres in FY14. The delay in implementation of several projects is making ONGC struggle to resist the falling output from aging fields and no incremental production is coming from new blocks bagged under the New Exploration Licensing Policy (NELP) auction.
Tapas Kumar Sengupta, director (offshore) of ONGC, who is working overtime to achieve the ambitious target and is responsible for development of offshore gas fields, said nearly three-fourth of projects have been executed and the remaining are under process.
A recent Citi Research report pointed out that there are key risks that could have an adverse impact on ONGC. These include increase in the company’s subsidy burden; delays in new production coming on-stream; risks of higher dry well write-offs as ONGC increases exploratory drilling, especially in offshore deep-waters; and sharp increase in crude prices and/or currency.
ONGC will benefit from reduction in under-recovery, due to diesel de-regulation, but it will be more than offset by the steep fall in crude, impacting its net realisation. “The latest gas price hike was disappointing, and questions viability of ONGC’s deepwater KG block,” said Edelweiss Securities in a report.