ONGC may seek fund infusion for KG project

The state run Oil and Natural Gas Corporation Ltd (ONGC) may seek government support for its KG-basin offshore project due to fluctuating oil prices.

According to a report in The  Economic Times, ONGC is planning to appeal for commercial support from the government for its $6-billion deep water project at the current oil prices, which have more than halved in a year to about $45 a barrel.

The company is also working on revamping its field development plan to cut capital spending and boost output. It aims to cut down oil production cost by $10 from $60 a barrel, says the report.

Apart from oil, as per the recently submitted field development plan report, the company also aims to bring down gas production cost by $1-2 from $6-7 a unit.

Currently, the company is under government pressure due to the prime minister's vision to shrink India's crude oil import by 10 per cent in seven years from nearly 80 per cent now.

As per recently released Standard & Poor's Ratings Services data, domestic gas producers Oil India Ltd and ONGC could face a revenue decline of Rs120-130 crore and Rs1,080-1,150 crore respectively, on gas sales during second half of 2015-16 fiscal.

"Globally, several E&P companies have scaled back spending and put new exploration projects on hold amid low hydrocarbon prices," it said.

Low gas prices could materially reduce profitability of ONGC's KG-basin gas discoveries.