ONGC to speed up exploration projects

After drawing flak from various quarters for its slow pace of work, state-run Oil and Natural Gas Corporation (ONGC) has decided to delegate decision-making powers to its officials in order to speed up its various exploration and production projects. Over the past decade, ONGC has seen oil and gas output from its field decline steadily.

During FY14, the company’s domestic oil and gas production was 45.03 million tonnes of oil equivalent (mtoe), the lowest in a decade. In 2005, production was 47.15 mtoe. ONGC’s scrip was up 2.78 per cent at Rs 454.80 on the BSE on the back of drop in crude oil prices and upgrade by Bank of America Merrill Lynch on a possible reworking in subsidy-sharing formula.

The company’s biggest project currently is Krishna Godavari-DWN-98/2, or KG D5, located in the Bay of Bengal. The project has been delayed by four years. It was to begin production this year, but it has now been pushed to 2018. “Our officials went to Kakinada to review the project and came up with a timeline of 2021 for production. This was not acceptable to us. We wanted to put it on production much sooner. It will be a challenge, but we said we want this to be produced by 2018,” said D K Sarraf, chairman and managing director, ONGC.

ONGC which was expecting a substantial gas output from the block said it will now produce oil too. The block is expected to see a peak production of up to 70,000-90,0000 barrels per day. This would be equivalent to nearly half of ONGC's biggest producing field-Bombay High. The block will see production of about 20-25 million standard cubic meters per day.

ONGC however, declined to divulge details on the reserves the block holds and the investment it would entail. Sarraf said the plans for the field are still at the drawing board would be submitted to the government in December 2014.

ONGC's KG D5 lies adjacent to Reliance Industries' KG D6. Early this year ONGC accused Reliance Industries (RIL) of gas "theft" worth Rs 30,000 crore from the its KG D5 block.

Sarraf, saying the matter was subjudice, declined to comment on the issue and any probable downward revision of the reserve base of the block due to the alleged theft.

ONGC, in which government would shortly divest 5% stake, said it is positive about the news on reduced subsidy burden. "Media reports suggest that our subsidy burden would come down. Total under-recovery for us could be around Rs 35,000 crore which we are quite comfortable with," added Sarraf.

ONGC had asked the government to address its subsidy issue before planning a stake sale. The government of India holds 69% stake in ONGC.

ONGC which also desires a higher gas price from its field said it has not asked the government for any gas price hike but said it has communicated to the government that cost of production form some of its fields will be higher than the existing fields. "Mahanadi will be much higher," Sarraf said without divulging the details.