$6-billion KG basin project not feasible at current oil prices, ONGC may seek government help.

Increasingly convinced that the oil and gas prices may not rise in a hurry, state-run Oil and Natural Gas Corporation (ONGC) is planning to seek government support for its $6-billion deep water project in the KG basin, without which, a company executive said, the project may not be viable. The company is also reworking its field development plan to trim capital spending and boost output to make the project work at the current oil prices.

ONGC is ever more convinced that the project, KG-DWN-98/2 field off the eastern coast, may not be commercially feasible at the current oil prices, which have more than halved in a year to about $45 a barrel. 'You need to do some out of the box thinking to make the project viable in this environment,' said a senior executive at ONGC, which recently submitted a field development plan (FDP) for the project to the upstream regulator, Directorate General of Hydrocarbons (DGH).

The company is now reworking its budget estimates, aiming to bring down oil production cost by $10 from $60 a barrel assumed in the field development plan, the executive said. Similarly, the target is to reduce gas production cost by $1-2 from $6-7 a unit taken in the plan. The price for locallyproduced gas in India is about $4.24 a unit on net calorific value basis while in the international spot market it is $7-8 a unit.

ET