Friday, June 12, 2009

ONGC is a Natural Gas Player

By Rakteem Katakey

June 11 (Bloomberg) -- Oil & Natural Gas Corp., India’s biggest energy explorer, may have lost 30 billion rupees ($630 million) selling natural gas at below production costs in the year ended March 31, Chairman and Managing Director R.S. Sharma said in New Delhi today.

ONGC sells natural gas to power and fertilizer companies, from fields allotted to it before India started auctioning oil blocks in 1999, below cost as the nation attempts to keep electricity and food prices in check and meet demand in the world’s second-fastest growing major economy. Inflation in India slowed to a three-decade low as the weakest economic growth in seven years sapped domestic demand.

The government has yet to implement an increase in the price of gas that was approved in May 2005, Sharma said May 18.

The explorer has asked the government to increase the price of gas produced at fields allocated to it to $4 per million British thermal units from $2.1 per million British thermal units, the Hindu Business Line reported March 17.

ONGC produced 22.5 billion cubic meters, or 60 percent of India’s output of gas, in the year ended March 31, according to the Oil Ministry’s Web site.

ONGC is attempting to start producing gas from new fields off India’s east coast by 2012, director of exploration D.K. Pande said Feb 23. The KG-DWN-98/2 field lies adjacent to Reliance Industries Ltd.’s KG-D6 field which began producing gas on April 2.

Reliance aims to supply more than 40 percent of the country’s oil and gas needs by March 2010.

ONGC plans to borrow 270 billion rupees for projects of units in the next three to four years, he said. These include a chemical plant in Gujarat and a power plant in Tripura, he said.

The company may borrow 50 billion rupees by January to redeem commercial paper that was used to fund the purchase of Imperial Energy Plc, he said.

The rise in oil prices was “worrisome” for the Indian economy, he said.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net.
Last Updated: June 11, 2009 10:41 EDT

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