ONGC seeks market freedom to open India's 8th sedimentary basin

New Delhi: State-owned Oil and Natural Gas Corp (ONGC) has sought pricing and marketing freedom to help bring to production a one-trillion cubic feet gas discovery that will open up a new sedimentary basin after over three decades.

ONGC, which has opened for commercial production six out of India's seven producing basins, has made a significant natural gas discovery in the Gulf of Kutch of Gujarat coast that can produce about three million standard cubic meters per day, a senior company official said.

This will open up the country's eighth sedimentary basin - the first in over three decades - for oil and gas production in two years. "We can bring to production the find in 2-3 years time," he said.

ONGC reviewed the project with Oil Minister Dharmendra Pradhan last week and set out conditions that will help monetise the gas reserves.

"The present government-mandated gas price of USD 2.48 per million British thermal unit does not make the discovery commercially viable. Since the find is in shallow waters, it does not qualify to get the USD 5.56 per mmBtu cap price set for difficult fields," the official said.

The current rates of gas are uneconomic, he added.

"We have asked the government to give us pricing and marketing freedom. What sense does it make to use precious foreign exchange to pay USD 6-7 for importing gas and not pay an equivalent amount to domestic producers. Afterall, any domestic production would only aid government's Make-in-India initiative," he said.

India has 26 sedimentary basins, of which only seven have commercial production of oil and gas. Except for the Assam shelf, ONGC opened up for commercial production all the other six basins, including Cambay, Mumbai Offshore, Rajasthan, Krishna Godavari, Cauvery and Assam-Arakan Fold Belt.

The official said the discovery made in the Gulf of Kutch is in shallow waters, but cannot be tied to either the production facilities in Mumbai High fields or Hazira and may require a new landfall point.

The BJP-led government had in October 2014 evolved a new pricing formula using rates prevalent in gas surplus nations like the US, Canada and Russia to determine rates in a net importing country.

Prices have halved to USD 2.48 per mmBtu since the formula was implemented. India's largest natural gas producer is demanding a floor or minimum price of natural gas be fixed at USD 4.2 per mmBtu and rates freed in a years time.

"We hope the government listens to us," the official said. "We should be able to bring the new find to production within 2-3 years from the date they give us for the requisite approvals," he said.