ONGC’s new boss D. K Sarraf has come out in strong support for doubling of natural gas prices from April one, puncturing Aam Aadmi Party’s claim that the cost of production was only $1 and the new prices were inflated.

In his maiden press meet after taking over as chairman of the largest public sector oil producer, Sarraf even said that certain discoveries made by ONGC are not viable even at $8 per million British thermal unit.

"Some of the gas may not be produced even at $8. It will be monetised at a later stage," Sarraf said.

ONGC is the biggest beneficiary of near doubling of gas price.

“ONGC's cost of gas production is about $4 per mBtu and the company hardly made any profit at $4.2 rate, he said. We believe that new price will be around $8 per mmBtu. It appears to be quite significant, but it is not in reality," Sarraf said.

He said that ONGC will gain an additional Rs 16,000 crore in revenue because of the new price, which may not be enough to make all its discoveries viable.

"Every dollar increase in gas price results in Rs 4,000 crore additional revenue on an annual basis. On a $4 increase, additional revenue would be Rs 16,000 crore and increase in net profit will be Rs 9,600 crore," he said.

Most of this additional revenue would flow back to the government in form of higher taxes, royalty and dividend.

“It may appear to be a significant increase but more than one-third of the additional income will go back to the government. Our net retention will be Rs 5,200 crore,” he said.

Sarraf said higher gas price will make many of its gas discoveries on the eastern offshore viable.

The KG-DWN-98/2 and where gas finds were made more than a decade back, will produce 25-30 mmscmd of gas beginning 2017, he said.

ONGC Director (Exploration) N K Verma said while the new gas price will make discoveries in KG-DWN-98/2 viable, some in Mahanadi basin block will still be unviable to production.
DH News Service