The state-owned Oil and Natural Gas Corporation (ONGC) refinery has sold initial gas produced from its fields in the KG basin in the Bay of Bengal to three companies, including Torrent Gas, according to a report by the PTI news agency. In an electronic auction, the public sector company (PSU) sold 1.4 million standard cubic meters per day, a fraction of the planned production of the block that lies next to Dependence Industries Area KG-D6 in the Bay of Bengal, to Torrent Gas Pune Ltd, GAIL (India) Ltd and Hindustan Petroleum Corporation Ltd (HPCL).
GAIL collected 0.8 mmscmd while HPCL took 0.42 mmscmd and Torrent 0.12 mmscmd. ONGC had sought offers from users such as urban gas operators that sell compressed natural gas (CNG) to cars and piped cooking gas to homes, companies that use gas to produce fertilizers or generate electricity, LPG producers and traders, for the gas from your KG-DWN block -98/2 or KG-D5.
Also read: ONGC Q4 Results: Cons PAT falls 53% to $Rs 5,701 crore, revenue up 5%; declared dividend
The bidding document showed that ONGC asked companies to quote a 'P' premium that they are willing to pay above the rate arrived at by calculating the prevailing 14 percent. Brent Oil price plus $1 per million British thermal units. At the current Brent crude price of $74 per barrel, the base price comes to $11.3 per mmBtu ($10.36 per mmBtu at 14 percent of the Brent oil price plus a $1 markup).
However, the sale price will be the lower of the price arrived at using this formula or the rate that the Petroleum Ministry of Petroleum Planning and Analysis Cell (PPAC) notifies twice a year for deepwater fields. . The maximum price for hard-to-produce fields such as deepwater for six months from April 1 is $12.12 per mmBtu.
The gas price for Torrent and others would be $11.3 per mmBtu. The company has once again delayed the start of production in the block's main fields. ONGC was originally going to start gas production from the Cluster-II fields at KG-D5 in June 2019 and the first oil stream was due to flow in March 2020.
The company blamed contracting and supply chain problems due to the pandemic for shifting the start of oil production first to November 2021, then to the third quarter of 2022, and then to June 2023. gas was revised first to May 2021, then to May 2023, and then to May 2024 for non-associated gas to start flowing.
However, these deadlines have now been moved to August. A floating production unit, called the FPSO, which will be used to produce oil, is already in Indian waters. ONGC will start with 10,000-12,000 barrels per day and will peak at 45,000 bpd in 2-3 months. They added that some gas would also flow with the oil, but actual gas production will start in May 2024 when production of 7-8 mmscmd is expected.
However, production estimates are much lower than originally projected. At the time of its launch in April 2018, ONGC had said estimated capex would be $5.07 billion and opex would be $5.12 billion over a 16-year field life.
The block has a number of discoveries that have been grouped into three groups: Group 1, Group 2 and Group 3. Group 2 is being put into production first. The Cluster 2 field is divided into two blocks, namely 2A and 2B, which according to the original investment decision were expected to produce 23.52 million metric tons of oil and 50.7 billion cubic meters (bcm) of gas during the field life.
Cluster 2A was estimated to contain reserves of 94.26 million tonnes of crude oil and 21.75 bcm of associated gas, while cluster 2B is estimated to hold 51.98 bcm of gas reserves, according to PTI.
Pool 2A was estimated to produce 77,305 barrels of oil per day (bopd) and associated gas at a rate of 3.81 million metric standard cubic meters per day (mmscmd) for 15 years. Group 2B is expected to produce free gas of 12.75 mmscmd from eight wells and have a 16-year mine life. But now, the production estimate is lower: 45,000 bpd of oil and up to 2.5 mmscmd from Group 2A and around 9 mmscmd from Group 2B, according to PTI.
Earlier this month, ONGC announced that it had successfully connected the Panna oil field in the Arabian Sea to the shoreline via a subsea pipeline, helping to save $43,000 per day in costs previously incurred in the transportation of crude oil via ships.
In the January to March quarter of fiscal year 2022-23, ONGC reported a consolidated net profit of $5,701 crores, 53% less than $Rs 12,061 crore in the corresponding period of last year. Revenue from the oil giant's operations during Q4FY23 held steady at $164,066.72 crore, registering a growth of five percent, compared to $155,946.99 crore in the same period of the previous year.
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Updated: Jun 29, 2023, 06:31pm IST
