Rs 81,800 cr lined up for projects, says ONGC

Elimination of diesel underrecoveries reassuring: CMD

State-owned petroleum explorer Oil and Natural Gas Corporation (ONGC) said on Friday that it would invest Rs 81,800 crore to bring new discoveries into production and check the decline in output from ageing fields.

The company has taken up 15 projects for development. Of these, seven are complete and eight are under implementation. “These projects, with an estimated capital outlay of Rs 40,573 crore, are geared up to produce an additional 45.6 million tonne (mt) of crude and 67.4 billion cubic metre (bcm) of gas,” ONGC’s chairman and managing director D K Sarraf told shareholders at the annual general meeting.

He added the company was focusing on two other projects – Daman, a cluster of multiple discoveries in western offshore and KG-DWN-98/2 in the Krishna-Godavari basin. The Daman project, with an estimated peak production of 8.5 million standard cubic metres a day (mscmd) and an investment of Rs 5,200 crore, has been approved by ONGC’s board. It is likely to start production by July 2016 while output in KG-DWN-98/2 will commence in 2018.

Sarraf said the management was employing technology to arrest the natural decline in ageing fields. A cumulative production gain of 87.4 mt had been achieved from such fields by the end of March 2014. This included 7.4 mt output in 2013-14 alone, roughly 33 per cent of the company’s total production. “A total of Rs 41,316 crore capital expenditure has been planned for such interventions across 24 projects, of which 19 have been completed,” he said.

Striking a positive note for the future, Sarraf said while the mechanism of sharing the subsidy burden of oil marketing companies (OMCs) had impacted the financials in FY14, the developments in the current year have been reassuring. According to him, diesel deregulation looks like a possibility owing to complete elimination of underrecoveries on the fuel and ease the firm’s share of subsidy burden.

Gross under-recoveries of OMCs on subsidised sales of diesel, kerosene and liquefied petroleum gas (LPG) had dipped 13 per cent to Rs 1.39 lakh crore in FY14. ONGC alone had to bear Rs 56,300 crore of the burden. The company’s net realisation had dipped 14 per cent to $40.97 per barrel on the back of a $65.75 per barrel discount offered to OMCs.

Sarraf said ONGC’s foreign subsidiary ONGC Videsh had invested Rs 41,700 crore in 15 months between January 2013 and March 2014, more than half of the total investment in four decades to 2012. He also said ONGC Tripura Power Company would commission the second unit of its 726 Mw gas-based power plant next month.

The company’s reserve accretion in the last financial year stood at 85 million tonne of oil equivalent (mtoe), the highest in 23 years. Production, however, dipped 1.2 per cent to 45.53 mtoe in FY14. ONGC had registered a five per cent rise in net profit at Rs 22,000 crore in FY14 on the back of gross earnings of Rs 84,200 crore.