NEW DELHI: State-run Oil and Natural Gas Corporation (ONGC) has unveiled a Rs 34,000-crore ($5-billion) investment plan to develop its KG Basin fields delayed for years, which would help boost the company’s oil and gas output by a fifth in about four years.
This is the first major investment announced by an oil firm two weeks after the government decided on a policy that almost doubles the prices for gas from difficult reservoirs, such as the fields operated by ONGCBSE -0.23 % in KG Basin.
ONGC executives had been wary of investing in the project at the current oil and gas prices, which have fallen about two-thirds in two years. The government controls gas prices in India, but oil is benchmarked to international rates.
We have analysed its economics. The economics is quite robust. We will be able to achieve the average threshold rate of return,” Dinesh Sarraf, chairman of ONGC, said on why the project has become viable now. “We are hopeful that the oil and gas prices are going to improve,” he added. Sarraf did not disclose the average cost of production nor the rate of return the company expected.
The project will yield a peak production of 3.5 million metric tonne (mmt) of crude oil per year, 17% of the company’s current oil output, and 16.29 million metric standard cubic meters per day (mmscmd), 28% of the current gas output, after four years. The project will produce its first gas in June 2019 and oil in March 2020.
