July 26 (Bloomberg) -- Oil & Natural Gas Corp., India’s biggest energy explorer, plans to spend a record $5 billion to develop gas fields to boost output by almost 60 percent in six years, two people with direct knowledge of the matter said.
The New Delhi-based explorer sought permission from the country’s oil and gas regulator on July 16 to invest the funds in nine natural gas discoveries off India’s east coast to produce 35 million cubic meters a day by 2016, one person said, declining to be identified before the Directorate General of Hydrocarbons approves the plan.
The amount is triple ONGC’s planned spending on its largest oil field and follows the government’s decision in May to double the price at which the explorer sells gas. India is ramping up gas output at the fastest pace in the world, according to BP Plc’s 2010 Statistical Review of World Energy, after companies including Reliance Industries Ltd. discovered new fields.
“ONGC has been discovering new reserves for a while but the concern is being able to convert them to production,” said Rohit Ahuja, a Mumbai-based analyst with Centrum Broking in Mumbai. “The company is looking to address this with the very good discoveries they have in the east coast.”
The producer of almost 25 percent of the crude oil used by India, Asia’s third-largest energy-consuming nation, is starting new fields at home as output declined at aging areas off the west coast. Reserves added in fields operated by ONGC in the year ended March was the equivalent of 82.98 million metric tons, the highest in the past 20 years, the explorer said April 26.
ONGC made 21 discoveries in the year, according to a May 28 statement on its website.
The shares fell 0.4 percent to close at 1,255.25 rupees in Mumbai trading. The stock has gained 6.4 percent this year compared with the 3.2 percent increase in the benchmark Sensitive Index of the Bombay Stock Exchange.
The state-run explorer produced 61.6 million cubic meters a day of gas from its fields in India in the year ended March 30, according to data on the oil ministry’s website. ONGC plans to produce gas from the discoveries for 10 years, the person said.
D.K. Pande, director of exploration at ONGC, and S.K. Srivastava, the director general of hydrocarbons, couldn’t immediately be reached for comment.
ONGC will increase spending by 8 percent to 270 billion rupees ($5.8 billion) in the year ending March 2011 to boost oil and gas output in Asia’s third-largest energy-consuming nation, D.K. Sarraf, the company’s director of finance said April 15.
The explorer’s crude oil output in the year declined 2 percent to 26.46 million metric tons and gas increased 1 percent to 25.6 billion cubic meters, according to the May 28 statement.
India’s government doubled the price of gas ONGC sells from fields awarded to it before 1999 to 6,818 rupees per thousand cubic meters from 3,200 rupees, Information Minister Ambika Soni said May 19. That will add 50 billion rupees to ONGC’s annual revenue, Chairman R.S. Sharma said that day.
ONGC approved spending of 71.33 billion rupees ($1.5 billion) over four years to increase oil output from its biggest field off the coast of Mumbai, the company said in a statement in January 2009. The gas discoveries in the east coast are part of the company’s biggest gas field and lie adjacent to the KG-D6 area, operated by Reliance Industries Ltd.
As of last September, Reliance had invested $5.8 billion of a planned $8.8 billion in its field, P.M.S Prasad, head of the company’s oil and gas business, said then. Reliance plans to produce 80 million cubic meters from the Bay of Bengal deposit.
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