ONGC begins gas production from KG 98/2 block


Oil and Natural Gas Corporation (ONGC) has begun the production of natural gas from the Cluster 2 field in the KG-DWN 98/2 block in the Bay of Bengal.

“Production is relatively insignificant today at 320,000 cubic metres of gas per day. From May onwards, we believe it will ramp up to 2.5-3 million cubic metres per day,” Subhash Kumar, Director, Finance, ONGC, said on an earnings call on Monday.

By May, the company expects to ramp up production of not only gas but also crude oil from the block, he added.

Average gas production from the project is expected to reach around 3-4 mmscmd in the financial year 2022, and 8.5 mmscmd in the financial year 2023, Kumar said. ONGC estimates the block will reach peak production by the financial year 2024, he added.

Capex and pricing

The capital expenditure on the project so far has been ₹9,785 crore. At the time of its launch in April 2018, ONGC had said the estimated capital expenditure would be $5.07 billion and operational expenditure would be $5.12 billion over a field life of 16 years. However, Covid-19 has affected the project timeline due to disruptions in the international supply chain, Kumar said.

The firm also expects to be able to sell its gas production at better prices. On Saturday, it announced the purchase of a 5 per cent stake in Indian Gas Exchange, the country’s maiden trading platform for imported natural gas.

“Our cost of production of gas is around $3.50 to $3.70 mmbtu depending on exchange rate and contribution from particular fields in a given year,” Kumar said. “I believe that it is only a matter of time that the anomaly in the gas prices from the nomination fields will be set right. It is likely that there will be a better regime that gives us remunerative price.”

The company on Saturday also announced that it is setting up a wholly-owned subsidiary that will buy gas from the parent company. ONGC hopes to consolidate its entire gas business under this new firm, Kumar said.


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