Lok Sabha Question No. 4272 (UNSTARRED), answered on 2019-01-07
Subject: Production Cost of Natural Gas
Ministry: PETROLEUM AND NATURAL GAS
Asked by: RAM KUMAR SHARMA KUSHWAHA, SHIVKUMAR CHANABASAPPA UDASI, M. B. RAJESH, PONNUSAMY VENUGOPAL

## Production cost of Natural Gas

4272.  SHRI RAM KUMAR SHARMA: SHRI M.B. RAJESH: DR. P. VENUGOPAL: SHRI SHIVKUMAR UDASI:

## पेट्रोल ियम एवं प्राक ृ तिक गैस मंत्री

Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

(a) whether the production cost of natural gas is higher than its retail prices and the current gas pricing method has been criticised by producers/upstream companies as being too low to attract investments in the sector and if so, the details thereof along with the present cost of production and the basis on which the retail price of natural gas is fixed by the Government;

(b)  whether there has been a huge decline in the domestic production of natural gas in the country  during  the  last  three  years  and  the  current  year  and  if  so,  the  details  thereof  and reasons therefor, company/oil and gas fields-wise;

(c) whether the Government has done any assessment of the impact of decline in production and availability of natural gas on the economy as a whole and power sector in particular and if so, the details and the findings thereof along with the corrective measures taken or proposed to be taken to meet requirements of domestic gas production in the country;

(d) whether natural gas production of ONGC from KG-DWN-98/2 is likely to start by December 2019  and  peak  gas  production  rate  is  projected  at  16  million  cubic  meters  per  day  and  oil output is pegged at 80000 barrels a day and if so, the details thereof along with quantum of increase in production of natural gas and crude oil per day registered during the said period;

(e)  whether ONGC has allocated 1.7 billion work package of crucial underwater kits in KGDWN-98/2 off the East coast and if so, the details thereof along with its potential to reduce country's import dependence for oil and gas by 10 per cent; and

(f) whether ONGC's domestic production during the current year has gone down 1 per cent as compared to last year resulting in the country's dependence on imports and if so, the details thereof along with steps taken to push up production two and half times by 2030?

## ANSWER

## पेट्रोल ियम एवं प्राक ृ तिक गैस मंत्री ( धमेन्द्र प्रधान ) MINISTER OF PETROLEUM& NATURAL GAS

## (SHRI DHARMENDRA PRADHAN)

(a) Cost  of  production  of  natural  gas  depends  on  several  factors  such  as  location (onshore, shallow water, deep water) of gas field, quality & composition of produced gas, gas type  whether  associated  gas  or  non-associated  gas,  age  and  size  of  the  gas  field,  type  of

reservoir,  logistics,  availability  of  surface  facilities,  exchange  rate  etc.  Since  factors  which affect cost of production are unique to each gas field, cost of production of gas varies from field  to  field.    Government  of  India  notified  'New  Domestic  Natural  Gas  Pricing  Guidelines, 2014'  on  25.10.2014.    This  pricing  mechanism  is  formula  based  and  has  been  worked  out considering the volumes and prices prevailing at major international markets such as Henry Hub(USA), National Balancing Point(UK), Alberta(Canada) and Russia.  The formula has been finalized considering the requirements of producing and consuming sectors, and has tried to make a fine balance between their interests. The gas prices notified for 1st October, 2018 to 31st March, 2019 is US$ 3.36/ MMBTU( on GCV basis)

Further, to incentivize domestic production of natural gas, Government notified a policy in March, 2016 to grant marketing and pricing freedom with a price ceiling on gas produced from discoveries in Deepwater, Ultra Deepwater, and High Pressure-High Temperature areas. Government has also provided marketing and pricing freedom for the sale of crude oil and natural gas to be produced under the Discovered Small Fields Policy-2015 and Hydrocarbon Exploration and Licensing Policy (HELP). Government has also granted pricing and marketing freedom to the gas produced from Coal Bed Methane (CBM) blocks. Recently, exploration & production companies working in north eastern region have been provided marketing including pricing freedom for the gas which are yet to commence commercial production as on 1 st July, 2018.

(b) & (c): The domestic production of natural gas in the country was 31.86 Billion Cubic Meters(BCM) in financial year 2015-16, 31.34 BCM in financial year 2016-17 and 31.91 BCM in financial year 2017-18.  Domestic natural gas is allocated as per prevailing gas allocation policy wherein power sector is a priority sector and balance demand is met through import of Liquefied Natural Gas (LNG) under open general license. To incentivize domestic production of natural gas, marketing including pricing freedom has been granted in deep water, ultra deep water and High Pressure-High Temperature (HP-HT) area, in north eastern region and fields under Hydrocarbon Exploration and Licensing Policy (HELP), Discovered Small Field (DSF) Policy and Coal Bed Methane (CBM) blocks.

(d) Natural  gas  production  from  KG-DWN-98/2  Block  is  proceed  to  start  by  December 2019. The peak gas production rate is projected to be about 15 Million Metric Standard Cubic Metre per Day and the peak oil production rate is projected as about 78000 Barrels of Oil per Day.

(e)  ONGC  awarded  the  SURF  (Subsea  Umbilical  Risers  Flowlines)  and  SPS  (Subsea Production  Systems)  package  on  1st  October,  2018  at  an  award  cost  of  about  USD  1.65 billion. This project envisages production of 25.87 million metric tonnes (MMT) of oil and 45.28 BCM of gas by 2035-36.

(f)    ONGC's  standalone  production  of  crude  oil  (including  condensate)  and  natural  gas  in 2018-19  (April,  2018  to  November,  2018)  is  30.464  million  metric  tonnes  of  oil  equivalent (MMTOE) as compared to 30.701 MMTOE in corresponding period of previous year 2017-18 (April,  2017  to  November,  2017).    ONGC  is  undertaking  several  steps  to  increase  the production of oil / gas and has chalked out two pronged strategy i.e. redevelopment of existing matured fields  and  development  of  new  fields/  marginal  fields.  Small/marginal  fields,  which were  not  viable  on  standalone  basis,  are  being  developed  through  cluster  development concept.

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