Revenues of India’s largest oil and gas exploration company — Oil and Natural Gas Corp (ONGC) — will grow by Rs 16,000 crore and net profit by nearly Rs 9,600 crore following the increase in domestic gas prices to $8 per unit from $4.2 per unit from April 1, 2014.
However, most of this additional revenue would flow back to the government, the company’s largest shareholder, in form of higher taxes, royalty and dividend and the company’s net retention will be Rs 5,200 crore, DK Sarraf, ONGC’s new chairman and MD said in his first media interaction after taking over the reins of the company on March 1.
Sarraf said while the price of $8 a unit appears to be substantial, it is still not sufficient to make all discoveries by ONGC viable. There were still few discoveries in the Mahanadi basin that are not viable at this price and would need a higher price of around $11 a unit, he added.
“Some of the gas may not be produced even at $8 a unit and will be monetised at a later stage,” the new CMD said.
Asked about claims made by the Aam Aadmi Party (AAP) that the cost of gas production is just $1, he said production cost involves not just operating but exploration cost, development expenditure, facilities expense and interest cost as well.
ONGC’s cost of gas production is about $ 4 per unit and the company “hardly made any profit” at $4.2 rate, he said.
On the government’s decision to ask ONGC to pick up a 5% stake in sister oil PSU Indian Oil Corporation (IOC), Saraff said” “I was for picking up the entire 10% which is now being shared equally by ONGC and Oil India Ltd (OIL).”
“We should have picked up at least 7% as I am very upbeat on IOC,” he added.
Domestic oil and gas production will continue to dominate ONGC’s growth plans, he added.