ONGC wants $65 a barrel for marginal fields' output

After taking charge, the new petroleum minister had asked ONGC to increase production from its 165 small and marginal fields

At a time when the new government wants state-run Oil and Natural Gas Corporation to focus on small and marginal fields, the company is seeking a higher retention price of at least $65 a barrel for crude oil produced from these.

After taking charge, new petroleum minister Dharmendra Pradhan had asked ONGC to increase production from its 165 small and marginal fields, to pull up the country’s overall production.

“We want to raise output from small and marginal fields, deepwater blocks and intensive or enhanced oil recovery from old fields. However, for this, we have already sought a higher retention price or market price for these fields from the new government,” confirmed a senior company executive.

Interestingly, about 90 of these fields are yet to start production.

He added the company was expecting a rise in production of 1.5 million tonnes this financial year, which might add Rs 2,000-3,000 crore to gross revenue. During the last quarter of the previous financial year, ONGC had reported its lowest ever net realisation. During the quarter, the company sold every barrel of crude oil for $106.65, while the net realisation after compensating to oil marketing companies came down to $32.78 a barrel.

“We conveyed to the government that for small fields to be viable, you need a higher price,” said the official.

The net price it got after discounting the subsidies for the previous financial year was $40.97 a barrel, down from $47.85 in 2012-13. The government was planning to put a cap on subsidy payment by upstream companies at around $56 a barrel.

“Because of this lower realisation, we are falling short of cash for our capital expansion plans of Rs 36,000 crore this year. We will have to source cash of about Rs 3,000 crore from our reserves of Rs 10,000 crore,” the official added.