Indian Prime Minister Manmohan Singh waves an ONGC flag. The company is scouting for local and international oil and gas discoveries to lift its output. (PA)
The new chief of India’s state-owned Oil and Natural Gas Corp. (ONGC) is scouting for oil and gas discoveries both at home and abroad in the hopes of lifting the company’s gas output by about 61% – to around a third of the country’s expected demand – in five to six years, he told Interfax.
“My primary focus will remain the core activity of exploration. We will have no stone unturned in revisiting the exploration strategy,” Sudhir Vasudeva said in an interview.
Vasudeva took over as ONGC’s chairman and managing director in early October, at a time when the company has come under fire for not doing enough to raise production and for slowing exploration efforts.
The pressure on ONGC continues to mount as most of its production fields are in decline and the country’s crude oil, coal and LNG imports are rising. The imports are becoming particularly expensive as the value of the Indian rupee against the United States dollar slides.
Lifting output
Against this backdrop, Vasudeva’s immediate plan is to maintain output and buy up new assets to raise production. “I am looking at a significant jump in ONGC output by 2013-2014,” he said.
The company could raise crude oil production by 15% to 28 million tons by 2013, while gas output could be raised to 100 million cubic metres per day (MMcm/d) by 2016-2017 from the present 62 MMcm/d. India’s overall gas demand is projected to reach over 300 MMcm/d by 2015.
“We are spending nearly INR500 billion [$10.2 billion] to improve oil recovery from our main 15 to 20 large fields that are 30 to 50 years old and account for 80% of our output. We will also monetise our marginal fields that are viable again. We are spending more than INR250 billion [$5 billion] for these efforts,” Vasudeva said.
ONGC will look to meet a target of 20 million tons of oil and oil-equivalent gas production abroad earlier than 2020, he said. ONGC Videsh, the company’s overseas subsidiary, produces 9.5 million tons of oil and oil-equivalent gas from 16 properties in Africa, Russia and Latin America.
But a significant jump in output can only come from new fields, Vasudeva admitted. “This has to be the number one priority,” he said.
Luring foreigners
Turning to domestic assets, the ONGC chief said the company is open to forming partnerships with overseas players that could bring in the necessary capital and technology, especially for the rich Krishna Godavari Basin fields off the eastern coast of India in the Bay of Bengal.
This is important for ONGC, considering private Indian firm Reliance Industries’ inability to raise gas output to predicted levels at its own Krishna Godavari blocks. Reliance has now tied up with the UK’s BP to help boost production (see Reliance, BP drawing up a plan of action, 18 October 2011).
ONGC is investing over $7.5 billion to develop a gas field in the Krishna Godavari Basin that lies next to Reliance’s prolific D6 Block, and has said that it is considering partnering up with foreign players.
“We are open to a stake sale,” Vasudeva said. “Firms such as BG, Petrobras, Statoil and BP have shown interest. We are still in discussion with them but are now quite sure that technology is not going to be a problem.”
ONGC is closely studying the proposal by BG India to invest in the KG-DWN 98/2 block in the Krishna Godavari Basin, he added. The Indian company plans to produce between 25 and 30 MMcm/d of gas from the block by 2016-2017. Another 15 MMcm/d of gas is expected from Daman on the west coast by 2013-2014.
In addition, ONGC is also looking to produce India’s first coal-bed methane (CBM) supplies, but some of its efforts have been hampered by land acquisition issues, Vasudeva said.
The company hit a roadblock in its CBM plans earlier this year, after five of its nine blocks proved to be commercially unviable, according to local news reports in March. The other four, however, are close to entering a development phase.
ONGC also competed drilling on India’s first shale gas well this year, and plans to finish drilling another three by March 2012.
Subsidies and pricing
Despite these investment plans, Vasudeva echoed the views of several others in the sector when he said that the government-set gas price of $4.2 per million Btu is too low and could make some of the blocks “unviable”. “We have conveyed to the government our view on the matter,” he said.
Just last month, BG and BP – two of the largest foreign players in India – expressed the need to free up government control over gas prices so that investors can ensure returns on their large investments and risk.
Along with concern of the regulated gas price, ONGC is hoping for more transparency from the ministries of oil and natural gas and of finance on the issue of fuel subsidies, Vasudeva said. The company pays these subsidies to state marketing firms that sell diesel, liquid petroleum gas and kerosene below cost price.
“We have accepted that subsidy will have to be borne and will impact ONGC’s profits. However, we want the government to make clear the burden and incidence of such outflow so we can plan our investments and outflows,” he said.
Regarding the repeated delays in the follow-on public offering of a 5% share in ONGC, part of New Delhi’s massive divestment programme, Vasudeva said erratic markets have resulted in the issue being postponed. The sale, which would cut the state’s controlling stake down to 69.14%, had been expected for September. Some analysts have suggested that the government continues to push it back while waiting for the rupee to regain some of its value.
“It is again up to the government to decide the right time to maximise gains,” he said.
ONGC chief on the hunt for new reserves
Indian Prime Minister Manmohan Singh waves an ONGC flag. The company is scouting for local and international oil and gas discoveries to lift its output. (PA)
The new chief of India’s state-owned Oil and Natural Gas Corp. (ONGC) is scouting for oil and gas discoveries both at home and abroad in the hopes of lifting the company’s gas output by about 61% – to around a third of the country’s expected demand – in five to six years, he told Interfax.
“My primary focus will remain the core activity of exploration. We will have no stone unturned in revisiting the exploration strategy,” Sudhir Vasudeva said in an interview.
Vasudeva took over as ONGC’s chairman and managing director in early October, at a time when the company has come under fire for not doing enough to raise production and for slowing exploration efforts.
The pressure on ONGC continues to mount as most of its production fields are in decline and the country’s crude oil, coal and LNG imports are rising. The imports are becoming particularly expensive as the value of the Indian rupee against the United States dollar slides.
Lifting output
Against this backdrop, Vasudeva’s immediate plan is to maintain output and buy up new assets to raise production. “I am looking at a significant jump in ONGC output by 2013-2014,” he said.
The company could raise crude oil production by 15% to 28 million tons by 2013, while gas output could be raised to 100 million cubic metres per day (MMcm/d) by 2016-2017 from the present 62 MMcm/d. India’s overall gas demand is projected to reach over 300 MMcm/d by 2015.
“We are spending nearly INR500 billion [$10.2 billion] to improve oil recovery from our main 15 to 20 large fields that are 30 to 50 years old and account for 80% of our output. We will also monetise our marginal fields that are viable again. We are spending more than INR250 billion [$5 billion] for these efforts,” Vasudeva said.
ONGC will look to meet a target of 20 million tons of oil and oil-equivalent gas production abroad earlier than 2020, he said. ONGC Videsh, the company’s overseas subsidiary, produces 9.5 million tons of oil and oil-equivalent gas from 16 properties in Africa, Russia and Latin America.
But a significant jump in output can only come from new fields, Vasudeva admitted. “This has to be the number one priority,” he said.
Luring foreigners
Turning to domestic assets, the ONGC chief said the company is open to forming partnerships with overseas players that could bring in the necessary capital and technology, especially for the rich Krishna Godavari Basin fields off the eastern coast of India in the Bay of Bengal.
This is important for ONGC, considering private Indian firm Reliance Industries’ inability to raise gas output to predicted levels at its own Krishna Godavari blocks. Reliance has now tied up with the UK’s BP to help boost production (see Reliance, BP drawing up a plan of action, 18 October 2011).
ONGC is investing over $7.5 billion to develop a gas field in the Krishna Godavari Basin that lies next to Reliance’s prolific D6 Block, and has said that it is considering partnering up with foreign players.
“We are open to a stake sale,” Vasudeva said. “Firms such as BG, Petrobras, Statoil and BP have shown interest. We are still in discussion with them but are now quite sure that technology is not going to be a problem.”
ONGC is closely studying the proposal by BG India to invest in the KG-DWN 98/2 block in the Krishna Godavari Basin, he added. The Indian company plans to produce between 25 and 30 MMcm/d of gas from the block by 2016-2017. Another 15 MMcm/d of gas is expected from Daman on the west coast by 2013-2014.
In addition, ONGC is also looking to produce India’s first coal-bed methane (CBM) supplies, but some of its efforts have been hampered by land acquisition issues, Vasudeva said.
The company hit a roadblock in its CBM plans earlier this year, after five of its nine blocks proved to be commercially unviable, according to local news reports in March. The other four, however, are close to entering a development phase.
ONGC also competed drilling on India’s first shale gas well this year, and plans to finish drilling another three by March 2012.
Subsidies and pricing
Despite these investment plans, Vasudeva echoed the views of several others in the sector when he said that the government-set gas price of $4.2 per million Btu is too low and could make some of the blocks “unviable”. “We have conveyed to the government our view on the matter,” he said.
Just last month, BG and BP – two of the largest foreign players in India – expressed the need to free up government control over gas prices so that investors can ensure returns on their large investments and risk.
Along with concern of the regulated gas price, ONGC is hoping for more transparency from the ministries of oil and natural gas and of finance on the issue of fuel subsidies, Vasudeva said. The company pays these subsidies to state marketing firms that sell diesel, liquid petroleum gas and kerosene below cost price.
“We have accepted that subsidy will have to be borne and will impact ONGC’s profits. However, we want the government to make clear the burden and incidence of such outflow so we can plan our investments and outflows,” he said.
Regarding the repeated delays in the follow-on public offering of a 5% share in ONGC, part of New Delhi’s massive divestment programme, Vasudeva said erratic markets have resulted in the issue being postponed. The sale, which would cut the state’s controlling stake down to 69.14%, had been expected for September. Some analysts have suggested that the government continues to push it back while waiting for the rupee to regain some of its value.
“It is again up to the government to decide the right time to maximise gains,” he said.