ONGC to invest in KG basin: Sarraf

KG basin has become viable after new policy announcement, feels ONGC chief DK Sarraf; decision on final investment soon

With the new hydrocarbon exploration and licensing policy (HELP) in place, state-owned Oil and Natural Gas Corporation (ONGC) would shortly firm up plans to make a multi-billion dollar investment in the KG-DWN 98/2 Cluster 2 block in FY17, ONGC Chairman & Managing Director D K Sarraf has said.

“With the new gas pricing model, KG-DWN 98/2 has become more viable for production,” said Sarraf, adding ONGC would take a decision on final investment by next month.

Cluster 2, according to Sarraf, will reach peak production of 17 million standard cubic metres of gas a day and 75,000 barrels of oil a day in 2020-2021. ONGC hopes to monetise the offshore field by 2019, and estimates reserves at 50-70 billion cubic metres of natural gas and 23.5 million tonnes of oil.

At a time when companies the world over are rationalising investments, Sarraf said ONGC was taking a contrarian view to continue investing in exploration & production activities.

“We are taking advantage of a lower-cost environment to drive exploration. Planned capital expenditure for the next financial year is about Rs 30,000 crore, but at lower cost of services this time. The investment in the KG basin will be over and above this figure,” he added. In 2015-16, the company approved six projects at a projected cost of Rs 14,000 crore and total production potential of 23 million tonnes of oil and oil equivalent of gas. Eleven projects have been completed so far in FY16.

“The government had provided clarity with regard to taxes, revenue sharing and pricing now. So, hopefully, the fields will be auctioned by June,” said A K Srinivasan, director (finance), ONGC.