India’s state-run explorer Oil and Natural Gas Corp (ONGC) expects to spend Rs. 31,000 crore ($5.9 billion) as capital expenditure in the financial year starting April 2012, chairman and managing director Sudhir Vasudeva said on Wednesday.
The expenditure will be funded through internal accruals, he told reporters on the sidelines of an energy conference.
ONGC, which has been investing heavily to maintain output from its old fields, has said it aims to raise its crude oil production by 15% to 28 million tonnes, or 560,000 barrels per day (bpd), by March 2014.
The company expects capital expenditure of R28,000 crore in the current fiscal year ending March.
ONGC produces about 63% of India’s oil output. The bulk of ONGC’s oil and gas output comes from old fields that were witnessing an annual decline of 7-8% until a few years ago, after which it began implementing techniques to improve oil and gas recovery.
The state-run explorer plans to buy out a 10% stake held by Cairn India in its KG-DWN-98/2 oil and gas block off India’s east coast, Vasudeva said.
“Our board has approved it,” he told reporters.
ONGC, which owns the balance 90% stake and is the block’s operator, will pay about $47 million for Cairn’s stake, estimated on cost-basis.
The company had said in June it was in talks with Italian oil major Eni and BG Group for the sale of up to 30% in the gas-rich block, which is situated close to Reliance Industries’ main D6 block in the Krishna Godavari basin.
Cairn India had made four discoveries in the Krishna Godavari basin block KG-DWN-98/2 and in 2005 wanted to sell 100% of its stake in the area to ONGC. But ONGC bought only 90% as it wanted to utilise Cairn India’s expertise and knowledge in exploiting the resource in the block.
But the two firms have not been on agreement on issues like the optimum way of developing the four pre-2005 discoveries and six subsequent finds.
Sources said there was a big gap in understanding of the resource with Cairn India feeling ONGC’s estimates of the blocks holding an in-place volume of 25.6 million tonnes of oil and 197 billion cubic metres of natural gas were grossly over-estimated.
(Reuters & PTI)