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Pricing Challenge May Cloud the ONGCs Future Expansion Plan

News

The government is unlikely to concede Oil and Natural Gas Corporation's demand that a price premium be paid for the gas from its deep water KG-DWN-98/2 field off the eastern coast so as to make its most challenging field viable. 
Source: ET

SNP Insight

Government’s hesitation allow to charge premium price deep water KGDWN- 98/2 basin may dwindle the future expansion plan of ONGC. But looking at present scenario this may be wiser move from government. When the gas price in international market hovering around at a very low point $2.21 per unit then producing gas from domestic basins at $7 for a unit gas is not in favor of national interest. So investing in this new expansion project may not be viable when it is expected that gas price may be on lower price for longer period of time. So, ONGC should consider to hold the capital expenditure on these projects till the return on investment on these projects should exceed the opportunity cost.

Source: SNP Infra Research