ONGC and Oil India to price natural gas from new wells at 20% premium

Gas produced from new wells in ONGC and Oil India's nominated fields will benefit from a premium equivalent to 12% of the Indian crude basket price

The Ministry of Petroleum and Natural Gas on Monday approved the allocation of gas from new wells or well interventions in the nominated fields of state-owned upstream companies, ONGC and Oil India Ltd. This gas will be priced at a 20 per cent premium over the current administered price mechanism (APM) or domestic natural gas price.
 

The initiative is expected to make new gas development projects more viable, encouraging increased domestic production.

According to the latest notification, gas produced from new wells in ONGC and Oil India’s nominated fields will benefit from a premium equivalent to 12 per cent of the Indian crude basket price. Under the existing policy, gas pricing is tied to the crude price, with the APM gas price currently set at 10 per cent of the Indian crude basket price. This rate is adjusted monthly by the Petroleum Planning and Analysis Cell (PPAC).
 

 

In a statement, ONGC said, “The enhanced price for new gas will make the new gas development projects viable and help ONGC to augment the production of natural gas from nominated fields in challenging areas that require higher amounts of capital and technology.”
 

The company announced that this initiative would bolster its ability to invest in development projects, particularly those that demand significant capital and involve substantial risks, necessitating appropriate pricing.
 

The ONGC Board recently approved the Daman Upside Development project in its designated Mumbai High field. With an estimated cost of about Rs 7,800 crore, this project aims to boost domestic gas production. The contract has already been awarded, and the company projects a peak output of around 5 million metric standard cubic metres per day (MMSCMD).
 

The Board has given the green light to another venture — the Integrated Development of four contract areas under DSF-II, with a projected expenditure of Rs 6,000 crore. The project aims to achieve a peak gas production of around 4 MMSCMD, leveraging the pricing and marketing flexibility granted under the Discovered Small Field Policy. According to ONGC, the contract for the project’s execution has already been awarded.
 

This policy’s rollout aligns with the government’s ambition to boost the share of natural gas in the energy mix from the current 6 per cent to 15 per cent by 2030.
 

India’s sedimentary basins are estimated to contain about 651.8 million tonnes of crude oil and 1,138.6 billion cubic metres of natural gas. Currently, the country relies on imports for 85 per cent of its crude oil needs.
 

To date, companies in the upstream sector have explored merely 10 per cent of the sedimentary basin. The government is now working towards increasing this figure to 16 per cent by the close of 2024, following the conclusion of the upcoming bid rounds under the Open Acreage Licensing Programme.

Additionally, the government aims to expand the country's exploration acreage to one million sq km by 2030. 

Meanwhile, Oil India on Tuesday touched a 52-week high following its inclusion in MSCI India domestic index. The stock price of ONGC also surged to a fresh 52-week high on Tuesday riding on positive market sentiment.

[With agency inputs]