ONGC to invest $5billion to boost its oil and gas assets
The announcement for the investment has come after two weeks, when the government has resolved a policy to double the gas prices from reservoirs like the ONGC operated fields in KG Basin
To develop a KG Basin Fields, Oil and Natural Gas Corporation(ONGC) has revealed that it is planning to invest Rs 34,000 crore, an initiative which has been delayed for years. This is likely to boost the company’s oil and gas output. This announcement has come after two weeks, when the government has resolved a policy to double the gas prices from reservoirs like the ONGC operated fields in KG Basin. Earlier the executives at ONGC were quite skeptical about investing in the project, given the current oil and gas prices, that have a seen a downward surge of about two- third in two years. The gas rate in India is controlled by the government, however the oil is standardized to international rates. Dinesh Saraf, Chairman of ONGC had said, “We have analyzed its economics. The economics is quite robust. We will be able to achieve the average threshold rate of return.” He also added, “We are hopeful that the oil and gas prices are going to improve.” However, Saraf did not reveal the rate of return or the average cost of production expected by the company. The whole project will see a maximum output of 3.5 million metric ton crude oil per year and 16.29 million metric standard cubic meters per day. That is 17% of the current oil output of the company and 28% of gas output. This increase will be seen after four years. The project is likely to see the production of its first oil in March 2020 and gas in June 2019. Director (Finance) of ONGC, A. K Srinivasan said, the project will improve the state run corporation’s profit by $585 million and revenue by $1.89 billion during the year 2020-21. ONGC would spend Rs.34,000 crores over the next four years, with an allocation of 1,500 crores for the current year. Saraf said, “the key challenge would be to identify vendors, contractors and consultants for the project.” He also said that the company is pretty much confident in taking a Deepwater project and also specified that they do not need an international partner with experience in Deepwater drilling. The project at KG Basin has a depth of 600- 15000 meters, however the highest is in Bombay high with a depth of 100 meters. And the deepest that the company has gone is in the Vasistha fields at a depth 680 meters, however it’s still work in progress and is expected to produce from the next year.
March 29, 2016 | 04:40pm IST
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to success.