ONGC's revised cost estimate for its KG-D5 block in 10 days

Development of KG Basin block not viable at under $4.2 a unit: ONGC

Government-owned Oil and Natural Gas Corporation (ONGC) has said would soon finalise the revised cost estimate for the development of its K-G basin discoveries. “The current cost estimate works out as 50 per cent plus or minus the original estimate. We are now going to arrive at the exact cost in a week or 10 days,” Chairman and Managing Director D K Sarraf said.

Sarraf said development of its D5 block in the Krishna-Godavari (KG) basin, off the coast of Andhra Pradesh, might not be viable at a gas price less than $4.2 per million British thermal units (mBtu), when asked at what price their estimated Rs 40,000-crore investment in the block would be viable. He was speaking to journalists here at the India Investment Summit organised by the finance ministry.

However, Sarraf denied a recent report that the company had written to the petroleum ministry for a revision of the government’s natural gas pricing formula of October 2014. The rate by this formula (based on the average in gas surplus countries like the US, Russia and Canada) is $4.24 per mBtu. A new rate for domestically produced natural gas based on the formula takes effect from April 1.

The company had earlier given a field development plan to the regulatory body, the Directorate General of Hydrocarbons, for starting production by 2018-19 from the block.

ONGC plans to produce 77,000 barrels a day of oil and 14 million standard cubic metres a day of gas from the initial discoveries in the D5 block by 2018-19.