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Natural gas production to rise by a third if output locked in ONGC, OIL fields opens up

India’s natural gas production will rise by a third provided the output locked in a dozen fields of state-owned ONGC and OIL is opened up by giving remunerative market prices, people with knowledge of the matter said. India currently produces about 90 million standard cubic meters per day (mmscmd) of natural gas and has ambitious plans to double output by 2022 to reduce its reliance on imports and replace some of the polluting liquid fuels to cut emissions.

Sources said, while the doubling of output would need a huge capital expenditure of close to $10 billion in bringing to production discoveries in deep sea and frontier areas, discoveries already made by ONGC and OIL provide a low hanging fruit.

State-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) haven’t been able to develop the discoveries or bring them to production as the current gas price of $3.36 per million British thermal unit (MMBtu) is way lower than the cost of production.

Sources said that ONGC has about 35 billion cubic meters of recoverable reserves in discoveries in the shallow sea off Andhra Pradesh on the east and off Gujarat and Mumbai on the west coast blocks.

The three blocks in Krishna Godavari basin, Gulf of Kutch and Mumbai offshore can produce about 10 mmscmd of gas and an equivalent amount can be produced from its onshore discoveries in blocks like Bantumili, Mandapeta and Bhuvanagiri, they said.

About 5 mmscmd of production can be added by making some investment in existing fields like Mumbai High South, Neelam and B-127 Cluster in the Arabian Sea.

The BJP-led government had in October 2014, evolved a new pricing formula using rates prevalent in gas surplus nations like US, Canada, and Russia to determine price in a net importing country.

While the government has allowed a higher rate of $7.67 per mmBtu for gas fields in difficult areas like the deep sea, ONGC’s Krishna Godavari basin block KG-OSN-2004/1, which has about 15 bcm of recoverable reserves, is in shallow waters and does not qualify as a ‘difficult field’.

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