ONGC preparing market plan for its K-G gas find

Oil and Natural Gas Corporation (ONGC) is planning to soon send a proposal for commercialisation of the dozen-plus gas discoveries in a Krishna-Godavari basin block next to KG-DW-98/3 or KG-D6, from where Reliance Industries Ltd has made the world’s biggest gas discovery.

ONGC plans to begin gas production from KG-DWN-98/2 in 2015-16. “There are more than a dozen discoveries in KG-DWN-98/2 block. We are planning to submit our proposal for commerciality of these discoveries to the Directorate General of Hydrocarbons this month. Once commerciality is established, the next stage would be to finalise a field development plan,” R S Sharma, chairman and managing director, told Business Standard. The block is estimated to hold 14 trillion cubic feet of reserves.

ONGC, as block operator, holds a 90 per cent interest in the block. The rest is owned by Cairn India, an arm of UK-based Cairn Plc. Brazil’s Petrobras and Norway’s Statoil had, until recently, 15 and 10 per cent interest, respectively, in the said block. Both have since exited.

ONGC is looking to offload part of its 90 per cent stake and has asked foreign companies, including ExxonMobil and BP, for proposals to buy a stake. The UK’s BG Group and Italy's ENI are learnt to have shown interest in taking stakes.

ONGC had bought the 90 per cent stake in the block from Cairn India some years earlier. In 2007, it had farmed out 15 per cent interest in it to Petrobras and 10 per cent to Norsk Hydro (now StatoilHydro).

The pricing of ONGC gas finds in the KG Basin is likely to be higher than the price of $4.2 per million British thermal units (mBtu) for Reliance Industries’ KG Basin gas. “I am categorically stating that current price levels are not viable to make investments. This ($4.2 per mBtu) is not a viable price for making future investments. Nobody in the world makes investments at these price levels,” Sharma said recently.