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Dwindling Cost Economics of New O&G Field Development Due to Low Oil Prices

News

Increasingly convinced that the oil and gas prices may not rise in a hurry, state-run Oil and Natural Gas Corporation (ONGC) is planning to seek government support for its $6-billion deep water project in the KG basin, without which, a company executive said, the project may not be viable. The company is also reworking its field development plan to trim capital spending and boost output to make the project work at the current oil prices. 

Source:  ET

SNP Insights

With stiff decline in oil prices, project viability of new deep water project of ONGC at risk, with development cost has gone 20-25% costlier than oil price per barrel. Although exploration cost is supposed to go down with drop in global investment , yet  it wont be sufficient to balance out the low price effect. If the trend continues, it might affect investment in exploration activity severely, which would negate PM’s dream to reduce import dependence by 10%  by raising domestic exploration.

Source: SNP Infra Research