NEW DELHI: India’s state-owned oil explorer won’t let low crude prices clip its wings. While the biggest oil crash in a generation has caused energy companies including Royal Dutch Shell and ConocoPhillips to cancel or delay about $400 billion in projects, New Delhi-based Oil & Natural Gas Corporation (ONGC) is adding a $5 billion development to its backlog.
ONGC’s counter-cyclical approach to investing is based on a fact and an assumption, chairman Dinesh Kumar Sarraf said in an interview in New Delhi on Tuesday. The fact: with other companies abandoning projects, costs will never be cheaper. The assumption: that same abandonment means prices will rise in coming years as growing demand overwhelms supply that’s fallen due to lack of investment.
“I don’t see any reason why we should be withholding investment now in such an environment where the cost of services and oil-field material is very low,” Sarraf said. “Our capital cost will be frozen forever,” while oil and gas prices will rise in the future, he said.
ONGC’s board on Monday approved $5.07 billion to develop the KG block in the Bay of Bengal off the east coast of India. The project, which is expected to be completed by June 2020, is targeting total production of at least 23.5 million metric tonnes of oil and 50.7 billion cubic metres of natural gas.
