Government’s policy will boost investment climate in oil & gas sector: ONGC Chairman DK Sarraf

A slew of policy measures announced by the government on Thursday will help accelerate investment in the oil and gas sector in the country, says Oil and Natural Gas Corp Chairman DK Sarraf in an interview with ET. A new industry friendly policy for oil and gas exploration is expected to attract investment, while higher gas prices will make it viable to develop fields in challenging terrains like the deep sea, although the new price would be applicable only on new production which would take three years to start. Edited excerpts:

The Cabinet has approved several policy measures today. How do you think it will help the sector?

It’s a golden day for the industry. So many important decisions have been taken. Now it is for the industry to respond. I am sure the industry will respond. The industry and ONGC will make more investments. This will boost the country’s investment climate.

A new pricing formula has been introduced for gas from deep sea and high-temperature high-pressure reservoirs. What would be its impact on ONGC?

This is very positive for ONGC. This will help us quickly make investment decisions on many discoveries. We have several discoveries in the KG Basin (off the eastern coast) and they start looking viable with the change in pricing formula.

Your big deepwater project in the KG Basin, KG DWN-98/2, has been languishing because it looked unenviable with current prices. Now, do you think it will become viable and the project will gain pace?

We were already working on the field development plan but pricing was an issue. With the decision on pricing today, the last hurdle in developing KG-DWN-98/2 field has been cleared. It will now gain momentum.

The new pricing for deep sea is now linked to landed import prices of coal, fuel oil, naphtha and liquefied natural gas (LNG). What would be the gas price at the current rates for the alternative fuels under the formula?

The price of fuel oil is about 14-15% of crude oil, and assuming crude oil at $50, the price of natural gas under the formula would come to about $7.5 per unit on gross calorific value basis. But that doesn’t matter. The production from these discoveries can start only after 3 years or so. What will matter is the future prices.

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