ONGC flaring Gamij gas, losing $4,000 a day

So far, company has seen delay of about two years in marketing natural gas from Gamij field

India is short of gas but that hasn’t deterred Oil and Natural Gas Corporation (ONGC) from flaring natural gas from its marginal gas fields in Gamij near Kheda, Gujarat.

Two ONGC executives told Business Standard as tenders for the sale of gas hadn’t been finalised, the company had no option but to flare gas (burn it in open air). As a result, ONGC was losing $3,800-4,000 daily, they added. A spokesperson, however, said only a small quantity of gas was being flared to meet technical requirements.

A company official said in the absence of a pipeline, the gas could be liquefied or compressed in cylinders but this could only be done when sales began. “The tenders for gas sale have been postponed thrice, for various reasons. Till we get buyers, flaring will continue,” he said.

The company has faced a delay of about two years in direct-marketing of natural gas from the Gamij field. In December 2013, it had, for the third time, invited fresh e-bids for the sale of Gamij gas from interested entities. Tenders for the Gamij field were opened on March 19, 2014. “A total of 24 bidders participated and seven filed bids. Currently, the bids are under technical evaluation,” a company spokesperson said, responding to emailed queries.

While the quantity of gas on offer is 21,000 standard cubic metres a day, the reserve price has been fixed at $5/million British thermal units. During previous bidding rounds, about 15 companies, including Adani Gas and state-run GSPC Gas, had qualified for the bids. However, as a few weren’t authorised for city-gas distribution by the Petroleum and Natural Gas Regulatory Board (PNGRB), the bid was aborted.

“Though the volume of gas ONGC is offering is not much, given the cost of gas and availability issues, we decided to bid,” said an Adani Gas executive. According to the government guidelines, ONGC can sell up to 200,000 standard cubic metres a day of gas from its small and marginal fields. The total investment in assets in the Gamij field is Rs 620 crore, with an annual operating cost of Rs 50 crore. According to the new terms for the tender, bidders have to secure regulatory approvals from the PNGRB, before the bids.

“The successful bidder has to comply with PNGRB’s regulations. For laying a pipeline, an application should be submitted to PNGRB, along with a bid,” said the spokesperson. Under the norms for the tender, those who sell the gas through a city gas distribution network won’t need PNGRB’s consent at the time of bidding, but at the time they commence gas supply.

Gamij has three gas wells. Together, these produce 40,000-45,000 standard cubic metres a day. Of this, ONGC uses 5,000-10,000 standard cubic metres a day for captive consumption; the rest is flared. “Of the three wells, gas from two is flared entirely. This is being done to avoid pollution. Until the bid winners are declared and sales begin, we cannot do much,” said a senior ONGC executive from Gujarat.