ONGC's gas discovery in Krishna-Godavari basin economically viable at $4.20 per unit

NEW DELHI: Oil & Natural Gas Corp's gas find in the Krishna-Godavari basin, adjoining Reliance's D6 block, is economically viable at the current market price of $4.20 per unit, government officials said.

ONGC had earlier estimated that the block would be commercially viable at a price of $7 per unit.

"ONGC has redrawn the proposal after thorough technical assessments of the ultra-deepwater (UD-1) discovery, which makes it commercially viable at $4.2 per unit," one government official said requesting anonymity.

If the block's management committee approves the project at its meeting scheduled this week, UD-1 can start producing natural gas in four years, officials said.

A former chairman of ONGC was, however, skeptical. "I still believe that KG discoveries are not viable at current gas price, unless there are changes in the original plan," one former chairman said.

ONGC's proposal, which has passed preliminary scrutiny of the Directorate General of Hydrocarbons (DGH) and the oil ministry, proposes an investment of $2.9 billion to achieve a peak output of about 20 million standard cubic meters per day from the UD-1 discovery.

Director general of hydrocarbons SK Srivastava did not respond to ET's SMS and email queries. Queries sent to the oil ministry and ONGC did not elicit any response.

DGH has also trimmed ONGC's in-place reserve estimate from 4.25 trillion cubic feet (tcf) to 3.94 tcf, officials said. The government's technical advisor for hydrocarbons estimates that 2.31 tcf could be recovered, they added.

ONGC discovered the UD-1 gas field in the southern part of KG-DWN-98/2 block along with five other discoveries within two years of increasing its stake to 90% in the block, in which Cairn India has reduced its holding to 10% in 2005. This is the deepest gas discovery in the Indian basin at a depth of 2,841 metres. The block is divided into two parts, the northern discovery area (NDA) and SDA. NDA has nine discoveries and SDA has the UD-1 discovery .